Employers May Have to Ask for HSAs That Allow Investing

While 90% of employers, benefit consultants, benefit brokers and financial advisers surveyed by HealthSavings said health savings account (HSA) participants are either somewhat or very knowledgeable about using health savings accounts as a means of saving for retirement, just 16% of benefit professionals said they actually counsel accountholders to invest their HSA funds.

More than one-third (36%) of benefit professionals stated it is not important to focus on investing rather than saving or spending, and 74% simply encourage their accountholders to save. But, employers disagree. When asked about which health savings account attributes are most critical, 65% of employers said a focus on investing is important, and nearly 40% of employers said they encourage HSA participants to invest as a retirement option.

Craig Keohan, chief revenue officer at HealthSavings in Richmond, Virginia, says these findings stood out for him, and should be a wake-up call for brokers. Plan sponsors have recognized the opportunity in HSAs but they may have to ask for programs that allow investing.

Alison Moore, vice president of marketing at HealthSavings in Richmond, Virginia, cites a July 2019 report from HealthView Services that says, “Total lifetime health care costs for a healthy 65-year-old couple retiring this year are projected to be $387,644 in today’s dollars ($572,960 in future dollars). This includes premiums for Medicare Parts B and D, supplemental insurance (Medigap), and dental insurance, as well as out-of-pocket costs related to hospitalization, doctor visits, tests, prescriptions drugs, hearing services, hearing aids, vision and dental.”

She also notes that according to the Employee Benefit Research Institute (EBRI), the industry average for invested assets in an HSA is 4%. But HealthSavings sees an average of 52%—13 times higher than the industry average.

Whether or not an HSA provider allows for investments depends on its business model, according to Keohan. He explains, “Right now cash, from a revenue generating perspective, is better than investments. For providers, the net interest margin off cash is higher than what it would earn off the investment fees it would charge.”

Keohan also notes that traditionally most HSA providers would require employee to achieve a certain balance before they were able to invest their HSA assets; however, this is changing.

The HealthSavings survey found the majority (58%) of employers and benefit professionals only offer one HSA option. Asked why this finding is important, Keohan says, “For health plan coverage, employees are offered choices. Employers are thinking they should offer more HSA options because some providers look at accounts only as spending vehicles, while others consider them a savings vehicle. It’s an opportunity for employers to offer both types to employees.”

Keohan adds, “To me, HSAs are no different than defined contribution retirement plans or IRAs. It is important for participants to invest HSAs to ensure they have a secondary retirement vehicle.” He also says HSA investments, like retirement plan investments, help participants’ accounts grow better than a regular savings account.