Employers across disparate businesses evaluate HSA providers on the ease of use for employees, the cost, the quality of the technology, available investment options and performance of the investment options—in chemical manufacturing, construction engineering and asset management—explains a variety of plan sponsors.
“It depends on what … you want to offer your employees. Being able to provide good choice and good accessibility to [investment options] is really important,” says Tamra Miller, benefits manager at Ingevity, a chemical manufacturer based in North Charleston, South Carolina.
Among the “the must-haves are easy access … [because account holders] need to be able to understand where their money is and how they can get to it,” Miller says.
Why HSAs?
High-deductible health plans—in which workers typically pay a lower monthly premium but a higher deductible—can be paired with health savings accounts as an additional benefit for employees. Account holders contributing to an HSA experience triple tax advantages, can invest the deposits for growth, get medical expenses reimbursed and use the funds accumulated to pay for qualified health expenses in retirement.
At the close of 2022, HSAs had $104 billion deposited in 35.5 million accounts—a year-over-year increase of 6% for assets and 9% for the number of accounts—according to the 2022 Year-End Devenir HSA Research Report. Account holders can invest contributions in mutual funds, similar to a 401(k), subject to conditions including minimum deposit thresholds.
Invested account dollars—HSA assets not held in cash deposits—were $33.8 billion at year-end 2022, down slightly from $34.4 billion one year earlier and greater than the $23.8 billion held at the close of 2020, Devenir found.
Some employers have addressed rising health care costs by offering employees high-deductible health plans, with more than one-quarter (28%) of firms that provide health care benefits offering a high-deductible health plan with a health reimbursement arrangement, an HSA-qualified HDHP or both in 2022, compared to 4% in 2005, data from the Kaiser Family Foundation showed. Within this cohort of employers offering health benefits, 25% offered an HSA-qualified HDHP last year.
The Selection Process
For plan sponsors, sorting through HSA providers and selecting a vendor requires evaluation of firms with different capabilities, said plan sponsors.
Ingevity formed with the completion of a spin-off from a larger company—workplace benefits were built up from the floor—explains Miller.
“We worked with a couple of companies to try and find a good vendor [and] landed on one that also worked very closely with our medical [health insurance] provider, because that can be important for ease of claims administration and the integration between claims [that] can be auto-created if the [providers are] connected,” Miller says.
When evaluating HSA providers, plan sponsors also focus on selecting a “vendor with solid resources for turning that [cash deposit] into an investment” which would result in tax-free growth to pay for health care costs and for participants to supplement their spendable assets on health care in retirement, Miller explains.
She added that plan sponsors want to select a vendor that uses a one-card design for benefits.
“If [the employer does] offer HSA and [an] FSA … everything can be loaded onto just one card, and [the card] knows intuitively which bucket of money you are allowed to access for whatever services,” Miller says.
For highly compensated employees, the investment component of HSAs is particularly appealing, says Gerald Wernette, a principal in and director of consulting services at Rehmann.
The firm has offered an HSA to workers for about 10 years, he says.
Rehmann focused on HSA provider fees and the investment returns for underlying investments, when they selected their provider, he adds.
“At the end of the day, it’s going to be the cost of their platform, the technology from the standpoint of participant access and utilization, and their underlying investment options: What does that menu look like, how’s the underlying performance? The underlying cost of those options?” Wernette says
The account tax benefits were also appealing to Rehmann, a business consultant and retirement plan advisory firm based in Farmington Hills, Michigan, adds Wernette.
“We’ve been working with HSAs for quite a while, and it was driven initially just [by] the pure tax benefits from the standpoint of somebody putting money in the plan, and then turning around and taking it out shortly thereafter and having more flexibility, compared to the flexible spending account in a cafeteria plan; that really was the initial driver,” he says.
When Rehmann added HSAs, the accounts were far more limited for investments beyond a money market option, Wernette explains.
“When we gained the ability to invest funds that were accumulated in the HSA, that changed the ballgame, and it became a much more robust option—especially for our highly compensated employees who could really take advantage of it, put the money away, tuck it away and not touch it, basically save it for retirement. Now it’s turned into an ancillary retirement savings vehicle” for account holders, he says.
Decisive Factors
Rehmann added an HSA option based on the recommendation of its health care consultant. The cost and the best overall fit for the firm were additional decision drivers for the selection for Rehmann, Wernette says.
“It really came down initially to cost, and we just ended up going with the provider that we were most comfortable with in that aspect,” he explains. “We benchmarked them most recently about three years ago and took a look at other providers in the marketplace [and] ended up sticking with the one we [have because] their website was fine; the investment options were decent [and] their cost structure was pretty darn good compared to competitors.
Employee accessibility, convenience and ease of use is also key, agrees Lucas Hellmer, associate vice president for compensation and benefits at Salas O’Brien.
The most important aspect for providers to demonstrate is ease of use for employees. Factors such as having a website that is easy to navigate, a system in which it is easy for employees to submit medical claims and delivering an appropriate level of service are all important, explains Hellmer.
“It’s one thing to set up a program that you think is going to go great, but if it’s a pain, no one’s going to use it,” he says.
Friction in employees’ interaction with vendors will likely lead to employees being frustrated and to low of use of the benefit, the worst outcome for Salas O’Brien, an engineering firm based in Irvine, California, Hellmer says.
Emphasizing Education
Employers can address challenges by picking a provider with robust education and resources for workers and by engaging employees to use the benefit optimally, Hellmer advises.
Education can remove uncertainty and some of the fear of using the account for anything other than a safe spot to place savings, adds Ingevity’s Miller.
“The biggest fear in getting people to invest in their HSA is getting [employees] past that hump of: Investing doesn’t mean [account holders] don’t have access to [the money]. Because that’s [employees’ biggest] fear: ‘If I take this money and I invest it and then I need it for a medical expense, I’m not going to have access to it,’” explains Miller. “[For many] vendors, it’s an easy process to transfer that money out of the [investment] account and into the HSA account, and so getting them educated on that is probably the hardest thing.”
Mobile capabilities can also be a differentiator for vendors, because these range widely in quality and may limit the tasks that can be carried out easily by account holders, says Greg Puig, vice president of benefit consulting services at Sentinel Benefits & Financial Group.
“Do they have an iPhone application [or] Android application available? Then what can you actually do within that application?” Puig asks. “In the past, especially, you would see some HSA vendors [where] their apps were view-only: You can go in perhaps see your balance, but [truly] facilitating anything through the app [wa]s relatively difficult. Whereas others have pretty much full website capabilities through their application, and it might in some cases be the preferred way people interact with the vendor. That’s one that’s continued to evolve and grow over the last few years.”
Saving vs. Spending
Robust smart card capabilities are now table stakes for providers in the plan sponsor selection process because the platform features and services vary for spending, as opposed to saving and investing, Puig says.
“This isn’t even a nice-to-have [any longer]; all vendors must have strong card capabilities, meaning, ’Are they using a smart card? Is there a way for the card to differentiate whether an expense is HSA-eligible or a candy bar at the point of sale?’” Puig says.
On the flipside, for savings and investing, plan sponsors obviously must consider the long-term viability and strength of the vendor in the long term for account holders.
Puig advises plan sponsors to focus on “how well-established is this HSA vendor? Are they brand new? Can you get the vibe that they’re thinking about trying to sell [the business] to somebody else and get out? Because that can be a little tedious,” he says. “I’ve gotten feedback from clients: ‘Our HSA vendor changed again because it was sold again; now we have a new website to learn, a new username and password. It’s just a deterrent to [greater use].”