Automating HSA Enrollment

PSCA recently released its 2023 HSA Survey, their fifth annual benchmarking survey of Health Savings Account (HSA) programs offered by employers that offer a High Deductible Health Plan (HDHP) for employees. The survey, sponsored by HSA Bank, reports on the 2022 year-end data from more than 500 employers. The trends over the last five years show that HSA programs are becoming more sophisticated and robust, though employers still find challenges in getting employees to enroll in the program and educating them about the benefits of HSAs.

Automatic Enrollment
A recent PSCA QOTW asked employers about their challenges with getting employees to open an HSA after they enroll in the HDHP. Many respondents indicated that it was a challenge, particularly in depositing employer contributions when employees don’t open an HSA right away. Other employers stated that they open the HSA for employees when they enroll in the HDHP to help ease this administrative burden.

This is a trend we are seeing in the annual HSA survey data – in 2022 nearly half of organizations (46.7 percent) reported that they automatically enroll eligible employees in an HSA – up by more than 30 percent in just two years. There may also be an emerging trend in employers using a default or suggested savings rate to encourage greater account funding (11.0 percent of respondents, up from nine percent last year and eight percent the year before).

Education
In addition to employing strategies borrowed from retirement plan administration such as automatic enrollment and defaults, more employers are framing HSAs as part of a holistic retirement savings approach and not just a spending account for current health care expenses. More than 40 percent of employers do so, up by nearly half two years ago (27 percent). Aligning HSA education with retirement plan education can help employees understand the advantages of both and develop a combined savings approach for health care expenses in retirement.

Explaining the (triple) tax savings benefits of contributing to (and saving in) an HSA continues to be the primary educational focus of employers, cited by more than 80 percent of respondents.

Funding the HSA
Though educating employees about the benefits of HSAs is still the primary concern of employers, fewer indicated it as the top concern this year while concern about employees being able to fund their HSAs is growing (indicated by a third of respondents, up from 20 percent the year before). Indeed, the average participant contribution dropped by $150 in 2022, though more participants contributed (80 percent, up from 72.8 percent in 2021).

Additional findings from PSCA’s 2023 HSA Survey include:

1. Take-Up Rates: Seventy percent of respondents offer multiple health plan options to employees – of those that do, only a third see the HSA-qualifying option getting more use than other options, though two-thirds have seen an increase in is use over time. 
2. Participation: Nearly 90 percent of eligible employees had an HSA in 2022 with 80 percent making contributions to it, up from 72.8 percent in 2021. 
3. Contributions: The average participant contribution in 2022 was $2,323, down from the last few years. 
4. Account Balances: The average account balance at the end of 2022 was $6,130, up from $4,237 in 2020.
5. Employer Contributions: Three-quarters of employers make contributions to the HSA. Most provide a set amount per coverage level.
6. Automatic Enrollment: Nearly half of organizations (46.7 percent) automatically enroll employees in the HSA if they enroll in the HSA-qualifying health option, up from 41.2 percent in 2021 and 35.3 percent in 2020. 
7. Retirement Savings: More than a third of respondents indicated that they position the HSA as part of a retirement savings strategy to employees up from 27.2 percent the year before.
8. HSA Concerns: Though employee education is still the most common HSA concern cited by employers, it dropped from 70 percent of respondents stating it was their number one concern in 2021 to 58.3 percent. 
9. Investments: Sixty percent of responding organizations offer investment options for HSA contributions, though most participants choose not to use this option – 70 percent of all HSA assets remain in cash. 
10. Fees: Nearly 60 percent of organizations pay HSA maintenance fees themselves. The fees are generally assessed monthly (89.3 percent of plans), and cost less than $5 a month/participant, on average.

The full survey can be accessed at https://www.psca.org/research/HSA.