Minding the healthcare benefits knowledge gap
Over the last decade employers have begun to understand the importance of offering employees financial wellness benefits. Financial concerns are a chief distraction for workers and in order to attract and retain talent, employers have been investing more in their employees’ overall well-being.
Indeed, 53% of employers offer workers a financial wellness program, according to Bank of America’s annual Workplace Benefits Report. That’s a rise from 24% in 2015. While there is a general understanding among employers and employees about the need for such programs, there is still a lack of in-depth knowledge of how critical healthcare benefits work.
“Financial wellness programs are becoming a mainstream part of employee benefit programs,” says Lisa Margeson, head of retirement client experience and communications at Bank of America. “We are seeing growing adoption of those programs, and we are seeing an impact on individuals' financial lives.”
Healthcare expenses remain a significant financial burden for employees, costing each an average of $7,685 annually, according to Bank of America. A tax-advantaged Health Savings Account can be a useful tool in preparing for unwanted medical expenses. Yet only 11% of employees surveyed by Bank of America were able to correctly identified an HSA’s four basic attributes. Similarly, a mere 7% of employers accurately identified features of an HSA.
“That was actually one of the surprising and alarming outputs of this research,” Margeson says. “We saw a disconnect last year, and we saw the same thing this year. But the good news is that there is an increasing number of financial wellness programs out there.”
In its simplest terms an HSA is a savings account that allows an employee to set money aside on a pre-tax basis in order to pay for qualified medical expenses. Employers can choose to offer an HSA to employees who have selected a high deductible health plan from the healthcare coverage options offered by their employers.
Over 40% of employees are enrolled in a high deductible health plan and about 56% of employers offer an HRA, according to the Society for Human Resource Management. The popularity of high deductible health plans has surged over the last 10 years, according to Morningstar's third annual HSA study, and so have HSAs — with total assets surpassing $60 billion as of mid-2019. By the end of 2021 the market will approach $88 billion in HSA assets, held by more than 30 million accounts, consulting firm Devenir has projected.
“As the HSA market further matures and competition heats up, the onus will be on providers to re-examine fees, bolster investment line-ups, and simplify and improve plan features,” Leo Acheson, associate director of multi-asset and alternative strategies at Morningstar said in the study. “The industry got a fresh reminder of that in the past year when Fidelity entered the market with its own HSA, emerging as a clear winner for both spenders and investors.”
HSAs can be a powerful tool when combating high healthcare prices, but without the proper education that weapon is effectively useless. There are many different levels to an employee feeling financially-well, Margeson says. Employees will sometimes skip a medical appointment or go without medication if the cost of these things are too high. If employers aren’t properly educated on healthcare benefits they cannot help their employees become financially-well and it could hurt them in retirement.
“What we encourage the education to focus on, is that an HSA should at least have a portion set aside for those healthcare costs in retirement,” Margeson says. “It is a powerful tool as individuals see those savings grow. It’s about sharing the realities of rising healthcare costs and educating on some of the tools and making financial professionals available to their employees.”
That was the number-one request respondents of the survey said they wanted — the assistance of a qualified financial professional. The inclusion of a financial planner takes the conversation beyond benefits and makes it more personal for the employee. They are looking for that one-on-one contact with someone who has a greater understanding of these industries and can help them come up with actionable and realistic plans for their future.
Financial professionals understand HSAs and can help communicate the power of them, Margeson says.
“More Americans are living paycheck to paycheck and employers and HR are recognizing that people struggle financially,” says Julie Schweber, a 20-year HR industry veteran and HR knowledge adviser for SHRM. “The worst case scenario is we have two-thirds of employees who say retirement [savings] and Social Security won’t be enough to support them. It’s important for employers to recognize that.”