Employees Have Yet to Embrace HSAs

A new analysis shared by Mercer outlines high level trends measured among employers offering health savings accounts (HSAs), finding that overall HSA use has grown relatively slowly.

“Despite the cost savings available, for the most part large employers still offer these plans as a choice, rather than as the only medical plan,” the analysis finds. “Just 6% of all large employers offer an HSA-eligible plan as a full replacement of their traditional medical plan.”

The analysis may be of interest to plan sponsors and advisers who have embraced a holistic view of health and retirement wealth benefits. This group understands the typical employee saving for retirement today can expect to spend hundreds of thousands of dollars on medical care during retirement—and so they embrace HSAs and any other tools aimed at easing that burden. At a high level, HSAs are favored because the accounts can be funded with tax-free contributions, can grow via tax-free investing, and can be maximized on the back end by tax-free withdrawals for qualified medical purchases. 

Findings show the largest employees are likeliest to offer HSAs as a choice to employees, but they are also the least likely to offer HSA-backed health coverage as the sole health benefit. In a divergence from the retirement planning market, it appears that employer contributions to HSAs are not a big motivator in getting employees to embrace them. As Mercer explains, “even when employers make a contribution to their employees’ HSA accounts, average enrollment is only slightly higher than when they don’t.”

Mercer finds more than half of all large employers offer an HSA-eligible plan at this stage, but under a fourth of covered employees are actually enrolled in one. With the right support, employees are more likely to both choose and report satisfaction with HSA-linked health coverage.

“Some employees clearly value the opportunity to pay lower monthly premiums and take advantage of the tax savings available, while others are reluctant to make that trade-off,” Mercer explains. “Whether you want to build enrollment over time or move to a full replacement, there are tools that make the transition easier for employees.”