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In all circumstances, a Health Savings Account is a multipurpose tool

By David Speier | May 20, 2020

Explore how the economic environment impacts the way employees optimize their Health Savings Accounts.
Benefits Administration and Outsourcing Solutions|Health and Benefits|Retirement
Risque de pandémie

Before the COVID-19 pandemic, the U.S. economic environment had been experiencing steady stock market growth, low unemployment and robust consumer spending for the better part of a decade. Saving toward future needs during times of economic growth is a good financial strategy. Like 401(k)s, which allow people to use pretax dollars to save for retirement, Health Savings Accounts (HSAs) are a powerful way to save toward future medical expenses. Our advice to HSA owners during those years was to leverage their triple tax advantage and use the account to save for medical expenses in retirement, rather than spending HSA funds on current medical costs. 

Today, U.S. citizens face new economic challenges as unemployment rates explode and many people are losing both paychecks and health insurance. In this environment, having an HSA can provide a cushion of money to spend on health care needs. The CARES Act of March 2020 acknowledged this need by restoring certain over-the-counter (OTC) drugs and items to qualified medical expense status. The change is effective for expenses incurred on or after January 1, 2020, and includes OTC medications such as pain relievers; cough, cold and flu remedies; and allergy medication as well as sunscreen (SPF 15 and higher), feminine care products and other items.

The impact of the current crisis is likely to shift how individuals use their HSA funds. As we looked at HSA usage patterns last year, approximately 5% of the population were pure savers, 65% were pure spenders (they spent essentially the same amount they contributed), and 30% were optimizers who saved when they could and spent when they had to. Under current conditions, we would expect the distribution to change, with a percentage of optimizers shifting toward becoming spenders, and possibly a reduction in the number of pure savers. 

Most employers are aware that employees can use an HSA to meet their needs as circumstances change with new life events and economic developments. Wise employers know that the support offered by their HSA account provider is critical to making sure employees understand how to optimize their account use. In today's dynamic environment, it is especially important to have an HSA provider who delivers enrollment, account management and support seamlessly to all employees — no matter how they utilize the HSA. Seamless delivery requires key tools and features to meet the needs of spenders, optimizers and savers:

Spenders require tools that help them spend efficiently and that give them rapid access to funds:

  • Rapid access — These employees require an efficient, responsive and easy-to-use system for filing claims.
  • Spending and payment flexibility — The HSA provider should offer a number of channels to access funds or pay a claim (e.g., via debit card, smartphone app or automated clearing house transaction).
  • Reminders — These employees can benefit from reminders that encourage saving for an emergency, such as the one we face today, and that point them to tools they can use to save.
  • Just-in-time information — The provider can deliver timely information to help employees understand their deductibles and the money they have available, and help them manage cash flow.

Optimizers want information to help them balance their saving and spending needs:

  • Decision support — This includes claim data and contribution tools that help employees optimize annual contributions to their HSAs.
  • Reminders — Like spenders, optimizers benefit from nudges that encourage pretax contributions for emergencies and other unexpected life events.
  • Financial wellness education — Whether enrolling, depositing or withdrawing, optimizers (and all other types of account holders) need education about the value of an HSA as a savings vehicle for emergencies, its tax advantages and the benefits of saving versus spending over time. 

Savers need support to maximize contributions and invest effectively:

  • Maximizing contributions — Enrollment tools can help employees set contributions at the maximum level based on family status and age, and the account tools can ensure they don’t exceed contribution limits.
  • Wise investing — Account tools should offer low-cost funds and make it easy to invest.
  • Turbocharged savings — A limited purpose flexible spending account, integrated with an HSA, can maximize employee savings. The limited purpose account allows employees to pay for dental and vision on a tax-preferred basis while still maximizing savings in the HSA.
  • Retirement goal setting — Calculators and other tools help employees set their savings goals so that they can afford to pay for appropriate health coverage products when they retire.

Whatever the preferred saving and spending pattern, HSAs offer a flexible financial instrument for optimizing health and wealth opportunities in any economic environment. For individuals who've lost employment and insurance coverage, an existing HSA offers a critical source of funds to help cover current medical expenses. For people whose employment and insurance situations remain stable, HSAs are still one of the best ways to save for current or future medical expenses using tax-advantaged dollars.


Managing Director, Benefits Accounts
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