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Two Roadblocks To Employee HDHP/HSA Adoption And How To Overcome Them

Two Roadblocks To Employee HDHP/HSA Adoption And How To Overcome Them


High deductible health plans (HDHPs) and HSAs allow employers to lower their health insurance costs while giving their employees the hands-down best vehicle for saving taxes on medical expenses. In addition, they typically lower employees’ monthly insurance premiums, as well as help both employers and employees dodge FICA taxes. However, there are two potential roadblocks that can quickly hobble employees’ enthusiasm about HDHPs and HSAs and limit employee adoption. Here’s what employers need to know about these hurdles and how they can overcome them.

Roadblock #1: Retirement healthcare expenses are massive (and only getting higher)

Solution: Employees’ HSA funds can be invested for future medical costs

As technology and medicine advance, humans are living longer, but they’re also racking up higher medical expenses. According to a recent Healthview study, the average couple retiring at age 65 in 2018 can expect to pay over $400,000 in non-Medicare-covered healthcare costs. Unfortunately, most people don’t realize they’ll be on the hook for that much. In a study asking respondents to estimate their retirement medical costs, 46% of respondents thought they would pay less than $100,000.

Pair that with a recent survey showing that 42% of baby boomers have nothing saved for retirement (nothing at all, not just for medical costs), and a grim picture emerges. People are massively unprepared for the weight of healthcare expenses they’ll face in retirement, and the savings they were planning to use on other things are going to be heavily impacted.

Here’s where HSAs come in. Because of their unparalleled tax benefits (contributions are pre-tax or tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free too), they’re the perfect vehicle for saving for healthcare costs in retirement. No other savings vehicle comes close. However, most people still view HSAs as a way to pay for current medical expenses; only 4% of HSAs have any assets that are invested. In fact, another study found that over half of respondents weren’t even aware they could invest HSA funds.

Employers, how about your people? Do they understand the looming wave of retirement healthcare expenses, and are they taking the right steps to stay on top of it? How are you consistently reinforcing the idea that HSAs are the best vehicles for accumulating tax-free funds for retirement medical costs? An annual open-enrollment meeting isn’t enough. If you’re serious about reframing HSAs for your employees, you need to bake the ideas into regular conversation and provide space to answer employees’ questions and address any concerns throughout the year.

In addition, you should make sure that your HSA provider aligns with your retirement focus. Many providers have thresholds accountholders must reach before they can invest funds, charge investment transaction fees, or offer funds with high expense ratios that eat away at returns. Ideally, you want a provider who offers first-dollar investing, no hidden investment fees, and a wide range of high-quality, low-fee funds (HealthSavings offers all of these benfits … learn more about our investments here).

Roadblock #2: Under HDHPs, employees are responsible for all pre-deductible medical costs

Solution: Own the responsibility of helping employees price-shop for healthcare expenses

So, your employees are enrolled in your HDHP and are fired up about investing their HSAs and accumulating medical nest eggs. However, this means they aren’t spending their HSA dollars on current healthcare costs, and HSA-qualified HDHPs can’t cover any pre-deductible non-preventive medical care. If your employees have only paid copays for doctor’s visits or prescriptions in the past, paying out of pocket for those services’ full costs might be more than they’re used to.

In addition, the healthcare industry isn’t set up to accommodate the price-shopping behavior people under HDHPs tend to have. Easy test: call up a hospital and ask how much a specific procedure costs. Hope you enjoy the hold music; you’re probably not getting your answer quickly, if at all. Even if your company’s HDHP offers lower monthly premiums, that may not matter to your employees if they’re overwhelmed trying to navigate the healthcare industry. You’ve got to help them out.

Here’s a quick summary of valuable resources to point your employees to if they’re having trouble figuring out the cost of medical care. It might be worth trying out a few of the resources yourself so you have a better idea of how to guide your employees. In addition, here’s a helpful resource on what employees should do if they get a medical bill that feels too high. Employees need to know what recourse they have if they receive an inflated healthcare bill. You could also help provide medical billing advocates for employees who are struggling to manage their healthcare costs.

Also, after employees pay the full cost of a few medical expenses out of pocket, they may start questioning why they ever moved to an HDHP. The feeling that things would have been cheaper with previous insurance can be powerful, even when it isn’t true. This step-by-step comparison tool can help you walk employees through the true cost of insurance plans and reassure them after a medical bill comes around. Even if employees don’t realize it when they go to the doctor, HDHPs frequently are cheaper than traditional plans in the long run because of their lower premiums and potential for employer HSA contributions.


By addressing these potential hurdles, you can save your company money and help your employees create financially secure retirements with investing HSAs. That’s a true win-win. If you’d like to learn more, check out how we do things or give us a call at (888) 354-0697 to talk with an account manager and start the enrollment process.