HR's Guide to HSAs

Are HSA’s going underutilized or misunderstood at your organization?

If so, you’re not alone. Recent statistics have suggested that employees don’t know much at all about their Health Savings Accounts - even if they have them! This represents a massive opportunity. Benefits are meant to be used – and if employees don’t understand the functionality and value of a benefit, employers risk having employees who don’t fully grasp all of their perks and compensation, leaving them potentially feeling undervalued or shortchanged. Therefore, this article will be a comprehensive guide to the ins and outs of HSAs and how you can educate your employees and encourage them to use them.

What are health savings accounts or HSAs?

An HSA is a tax-exempt account specifically for medical and healthcare costs. Employees can take money out of their HSA at any time as long as it’s used for qualified medical expenses – which can include out-of-pocket expenses. But there’s more to it than just convenience: the money is never taxed – not when it’s put into the account and not when it’s withdrawn. The money in the account can also be invested and it rolls over from year-to-year (unlike FSAs which must be used each year). Given that, it can also be used as a supplemental retirement savings account!

The IRS continually updates an expansive list of what’s considered an eligible expense which includes medical, dental and vision care, and expenses such as (but not limited to): eyeglasses, physical therapy, psychological counseling, hearing aids, dental work, breast pumps, smoking cessation programs, AA programs, chiropractic services, over-the-counter drugs, and menstrual products.

To be eligible for an HSA, employees must be:

1. Enrolled in a high-deductible health plan.

2. Not enrolled in Medicare.

3. 18 years or older and no one can claim them as a dependent on their tax return.

What are the benefits of HSAs for both employees and HR?

HSAs are paired with HDHPs (high-deductible health plans), which offer lower monthly premiums in exchange for higher deductibles. This can be a cost savings for organizations, particularly if they encourage employees who don’t have major health concerns (and therefore have low out-of-pocket healthcare expenses) to use these types of accounts. And again, because the money in an HSA can be saved, invested, and rolled over, it can be a powerful savings and investment vehicle for employees who would otherwise be paying high premiums for underutilized healthcare.

To further expand on additional expenses approved by the IRS, it can be used for (but is not limited to):

• Acupuncture

• Birth control

• Blood pressure monitors

• Body scans

• Childbirth expenses including classes and midwife care

• Contact lenses

• Dental treatments and/or dentures

• Diabetes supplies including insulin

• Eye surgery including laser surgery

• First-aid kits

• Flu shots

• Food, grooming, and care for guide dogs that assist with disabilities

• Infertility treatments including egg donor expenses

• Nursing care

• Oxygen and equipment

• Physical exams

• Surgery except for elective cosmetic surgery

• Thermometers

• Ultrasounds

• Vaccines

• Vasectomies and reversals

• X-rays

And much, much more. To obtain the full list, visit the IRS’s website. There are also additional expenses that become eligible depending on particular health diagnoses that an employee may receive.

How can HR encourage the success and usage of HSAs in their organization?

Fully explain the features: Some people use HSAs solely as a cash account – or they don’t use it at all. Explaining the tax-advantages, the ways that it can supplement retirement health costs, and sharing the full list of what constitutes a qualified expense can go a long way in getting employees interested in setting up and using their own accounts.

Offer investment options: Similar to retirement accounts, the more robust the better! Employees who are interested in using this as an investment vehicle will be keen to know exactly what type of funds or products they can invest in, any relevant fees, and other key details that are much more compelling than a standalone cash account.

Covering maintenance fees: By covering or reimbursing any fees related to the maintenance of these accounts, HR can help make investing in an HSA even less of a risk for employees, as they won’t have to worry about essentially paying for their use of this account.

Educating new hires in benefits sessions: Rather than sending over the benefits and healthcare options and hoping that people read it, HR can have a dedicated session to understanding and maximizing HSAs. As a bonus and to add further clarity, HR can also make this an FSA and HSA discussion so that people can understand the difference between the two.

Contributing to HSAs: Similar to 401(k)s and other retirement vehicles, employers can create a match or contribution program towards employee HSAs. While an employee may not be otherwise compelled to contribute, earning an additional $1 for every dollar that they invest can be a powerful persuasion tool.

And GoCo can help!

Digital Benefits- With an HRIS like GoCo, employees can easily access anything and everything benefits-related with the click of a button. They can view all of their health plans at-a-glance, provide information on HSA options, along with any contribution or payment info that is relevant. And employees can easily change or elect new benefit options on their own laptops without the fussy paperwork that usually comes with enrollment. You also have access to certified benefit advisors who can help employees further on HSA information.