Employees Need HSA Education

Two-thirds (65%) of respondents in a survey by Fidelity Investments said they do not understand how an HSA works. Confusion between an HSA and a health flexible spending account (FSA) is prevalent. Seventy-three percent of respondents said an HSA is pretty much the same thing as a health FSA or were unsure, and the “use it or lose it” provision of FSAs was one of the most commonly misunderstood differences between the account types.

Health FSAs require that all annual contributions be spent by the end of the year on eligible out of pocket health care expenses. Remaining FSA balances are forfeited. Unlike a health FSA, HSA balances carry over from year to year allowing account holders to accumulate their savings for qualified health care needs in retirement, as well flexibility with their spending. However, 69% of all respondents incorrectly felt they would lose unspent money in an HSA at the end of the year.

“It’s clear more can be done to educate employees on the numerous benefits of HSAs, from saving for current and long-term qualified medical expenses to factoring health care costs into retirement planning,” said William Applegate, vice president, Fidelity Investments. “Employers that offer HSAs should deliver employees easy-to-understand communications and intuitive decision support tools, along with onsite and online workshops that clearly explain how HSAs work and how employees can benefit.”

Nearly two-thirds (65%) of respondents who enrolled in their company’s HSA-eligible health plan and opened an HSA said they received the right amount of employer communication to help them make the decision. Of these respondents, the most influential source that helped guide their decision was their employer or spouse’s employer. Contrasting these findings, of those respondents offered the option but declining it, only 9% said their employer influenced that decision, and 55% spent less than a half hour researching their health care benefits options.

Of respondents who chose their employer’s HSA-eligible health plan and opened an HSA, financial considerations were top factors in their decision to do so. When asked the reasons behind their choice, 48% of respondents cited how HSAs allow account holders to carry over remaining funds year to year, 45% said lower premiums, 38% said the tax savings, and 25% said an HSA is an attractive savings vehicle for their anticipated health care expenses in retirement.