Planting a Seed: How employers can help foster HSA adoption

Employers want to see their workers happy, healthy and thriving. In a competitive job market, they can’t afford not to offer a benefits package that supports overall health and well-being. Yet the reality remains, healthcare costs continue to rise, putting a strain on employers and employees alike.

A high-deductible health plan (HDHP) paired with a health savings account (HSA) is a great option for driving consumerism and potential savings, provided employees are given enough education and support. A variety of factors can affect their decision to adopt this kind of plan.

For one thing, if someone isn’t familiar with the concept of an HDHP, they’re likely to experience sticker shock when encountering their first deductible – which in 2023 will start at $1,500 for individuals ($3,000 for families), and can run much higher.

Employers can help defray some of this anxiety by contributing to their employees’ HSAs, a practice known as seeding. This can take the form of a lump sum upfront, a scheduled contribution (monthly, quarterly, per pay period, etc.), or a mix of the two. Research shows that employees are more likely to adopt and engage with seeded HSAs. It doesn’t take a huge contribution to help them feel supported and make choosing an HDHP a viable option.

The practice of HSA seeding may seem expensive to employers, especially without a guarantee of adoption. However, companies can certainly find a sweet spot where seeding will still cost them less than if they were offering a PPO plan as well. HSAs also offer tax advantages for both employers and employees (HSA dollars are excluded from payroll tax), meaning these accounts can be a win-win for all parties.

Aite-Novarica Group conducted a study in May 2022 that found employers contribute on average 29% of whatever funds are going into an HSA.” — Inci Kaya, strategic advisor, Aite-Novarica Group

Seeding isn’t the only way to encourage HSA adoption. Employers can also offer to match contributions, either dollar for dollar or on a percentage basis. Or, they can incentivize adoption by recognizing and rewarding milestones, such as when an employee renews their HSA for another year or reaches the investment threshold.

Some best-in-class open enrollment strategies have incorporated HSA seeding. To learn more this topic and other 2023 open enrollment trends, check out our recent webinar with Aite-Novarica Group.