Valuable Information

Considering an HSA? Get an Early Start on Planning and Communications

Industry surveys indicate that enrollment in health savings accounts (HSAs) is surging. According to figures from America’s Health Insurance Plans; a national trade association, more than 1 million people were covered by HSAs as of March 2005, doubling the enrollment figures from six months earlier.

Employers considering adding an HSA shouldn’t let these figures make them complacent about implementation and communication strategies. HSAs are both complex and different from the type of health insurance coverage employees are used to, and require a more consumer-conscious attitude toward the use of health care services. Employers introducing HSAs must realize this, and plan their implementation timetable and communications accordingly.

According to research conducted by Watson Wyatt Worldwide, more than half—61 percent—of adults have not heard of HSAs, 29 percent have heard of them, and 10 percent are unsure. Of adults who have heard of HSAs, only a third say they completely or mostly understand them, while another third say they “somewhat” understand them.

Furthermore, those surveyed have mixed reactions to HSA features. After receiving an explanation about how HSAs work, the surveyed adults expressed extremely positive reactions to the control one has over HSA funds (60%), the lower health plan premiums for the high deductible health plan (HDHP) paired with the HSA (55%), the tax-free accrual of HSA money (45%), and the independence of health care decision making associated with HSAs (43%). However, large numbers were concerned about the higher out-of-pocket costs associated with HSAs; for example, 86 percent found the higher deductible of the HDHP “extremely undesirable” or “somewhat undesirable.”

This concern about out-of-pocket costs takes on more importance in light of another survey finding—36 percent of the surveyed adults said that the most influential factor in their decision of whether or not to enroll in an HSA would be the maximum out-of-pocket cost. The maximum out-of-pocket cost factor outranked all other choices as the most influential factor in HSA enrollment, including scope of services covered under the health plan, premium reduction, and amount of employer HSA contribution.

This data underscores the importance of HSA communications, not only in informing employees about the mechanics of HSA operation, but in overcoming any negative impression about HSAs and helping employees that do enroll to use HSAs to their best advantage. As noted in the survey report, “companies wanting to implement HSAs to slow rising health care costs will need to thoroughly educate their employees regarding the potential rewards of this new approach.”

And what’s the most effective way to do this? Fidelity Workplace Services examined some early HSA adopters to see what was significant in achieving a successful HSA rollout. Fidelity identified three key factors:

• Communicating plan information early (as much as six months before changes were to take effect), and in stages;
• Providing education support to help employees evaluate their choices (such as cost calculators that help employees see how a specific choice could impact them on a personal level); and
• Changing health plan designs (beyond just adding the HSA option) and requiring an active enrollment with employees who did not make an active enrollment decision being defaulted into the HDHP/HSA option.

Beyond these three, other factors that influenced successful HSA rollout included some level of employer contribution; support from senior and frontline management; development of a strategy that identifies how HSAs fit with the company’s long-term plans; an understanding of how new plan designs could affect different employee groups gained through modeling of contemplated designs; and working closely with the health plan carrier to ensure an understanding of administrative issues.

Taking the time to carefully plan for an HSA rollout and engaging in early and thorough communications with employees will ensure that the plan will succeed in meeting the goals of the business and can attract strong numbers of eligible employees at enrollment.