In much the same way that company-sponsored pension plans of yesteryear resulted in employee apathy about where retirement dollars came from and how they were invested, leading to today’s consumer-directed 401ks, company-sponsored health plans are following a similar path leading to greater adoption of HSAs.
Understanding the shift from pension plans to 401k plans, employers can help smooth the transition from defined healthcare plans to consumer-directed healthcare, resulting in lowered health care costs across the board and increased consumer empowerment over health care decisions.
1. Education is key
In the early days of the 401k, many consumers were overwhelmed by all of the new choices for participation. Many of these employees, accustomed to a pension system that was simply funded and available after retirement, were now faced with a menu of complex investment options, as well as rules, regulations and an increased assumption of risk.
This same potential for overwhelming both HR departments and employees exists with HSA plans today. HSA plans may initially be more difficult for consumers to wrap their heads around when previously they didn’t have to think about where healthcare dollars came from, or how best to spend them. Fortunately, there are ways to ease the education experience and increase adoption of HSAs among employers and employees.
Like the investment prospectuses associated with 401k plans, if employers simply distribute booklets of overwhelming information during open enrollment, they can expect low participation. A more successful strategy is to provide information throughout the year through multiple channels. In addition to open enrollment materials, offer webinars, lunch and learns, on-demand video, displays, and dedicated Intranet pages. Information should be available and reinforced throughout the year, as traditional open enrollment periods occur during the busiest part of the year for most people.
Positioning is also crucial for gaining adoption. Rather than imposing the transition to an HDHP on employees, employers can get them excited by showing the math on premiums and tax and investment savings and opportunities. Position the HDHP alongside the HSA as an investment and savings vehicle that delivers the opportunity to control their own health and wellbeing. Also, clear up common misunderstandings, such as the belief that employees will lose their HSA funds when leaving their employer.
2. Incentivize employee participation
The greatest incentive to drive 401k participation is matching employer contributions. Similarly, many employers offer an annual dollar amount contribution for employees participating in their HDHP/HSA plans. Incentives, alongside education, are key to driving greater adoption of HSAs in the same way they helped move 401ks to the mainstream. One medium sized company was able to gain a 90 percent adoption rate for their HDHP/HSA plan though employer contributions in conjunction with proper promotion and positioning of their new plan design.
If cold-hard cash isn’t in the cards for an employer, there are other ways to incentivize adoption among employees, including:
3. Growth potential is tremendous
An examination of the growth rate during the early days of 401k adoption and funding compared to HSAs todays, shows an uncanny similarity. HSAs were put into law in 2004, so we are still in the fairly early days, but if adoption and funding continue to remain on track, enrollment in HDHPs will double in the next 5 years to more than 50 million participants.
If that’s not enough to make the case for why employers and healthcare plan providers should consider offering HSA plans, consider that HSA implementation and adoption has grown steadily over the last 15 years and is increasingly becoming mainstream among younger employees. Add to that the impending “Cadillac Tax” on benefit-rich health plans, and it becomes apparent that both health plan administrators and employers will no longer be able to delay or avoid the transition to consumer-directed healthcare.
For more information on this topic, fill out the form on the right to watch our on-demand webinar, “Blast from the Past: What 401ks can teach us to drive HSA growth.