Open enrollment season is here, and with a projected five percent increase in health care costs for 2018, employers are looking to control spending. As a result, employees selecting their benefit plans for 2018 will see higher costs, more cost sharing, and in most cases, a high-deductible health plan (HDHP) option.
Large employers project health care benefit costs to exceed $14,000 per employee next year, according to an annual survey of large employers by the National Business Group on Health. Its “Large Employers’ 2018 Health Care Strategy and Plan Design Survey” found that 90 percent of survey respondents will offer at least one type of consumer directed health plan (CDHP) in 2018, up from 84 percent in 2017. And, among those employers offering a CDHP option, 80 percent will offer an HDHP paired with a health savings account (HSA).
This is good news for credit unions offering HSAs to their members as there is a direct correlation between the increasing number of HSAs and the growth in CDHPs. Open enrollment season gives credit unions an opportunity to promote their HSA offerings and educate members who are in the process of selecting their health benefits about the advantages of an HSA.
Many Members Not Aware of HSA’s Triple Tax Benefits
An HSA is unlike any other tax-advantaged savings vehicle in that it offers a triple tax benefit:
- Contributions to an HSA are tax-deductible (pretax if made through payroll deduction).
- The interest earned in an HSA is tax-deferred.
- Distributions for qualified medical expenses are tax-free.
An HSA can also be used to save for medical expenses in retirement.
That said, members may not be aware of these HSA benefits, so educating them about an HSA and its financial opportunities is important. The 2016 Employee Benefit Research Institute (EBRI)/Greenwald & Associates’ “Consumer Engagement in Heath Care Survey” reported that 14 percent of privately insured adults were enrolled in a CDHP. And, while more than half of CDHP enrollees (56 percent) opened an HSA, the survey reported that 25 percent of CDHP enrollees were enrolled in an HSA-eligible plan but had not opened an HSA.
Data Shows Continued HSA Growth
Despite what seems to be a general lack of knowledge about how HSAs work, HSAs experienced double-digit growth last year, as they have every year since they became available. Credit unions that offer HSAs recorded a more than 17 percent increase in HSA deposits last year and held $1.38 billion in HSA deposits as of year-end, up from $1.17 billion as of year-end 2015, according to call report data analyzed by the Economics and Statistics Department of the Credit Union National Association (CUNA).
Yet credit unions held just a fraction of the almost $37 billion in HSA deposits in 2016, according to the “2016 Year-End Devenir HSA Market Survey,” which surveyed primarily the top 100 HSA providers. That is because less than 15 percent of credit unions offer HSAs to their members.
HSA providers surveyed by Devenir in 2016 projected that HSA assets would grow by 20 percent this year and estimated that their own HSA business would grow by 24 percent. Based on the “2017 Mid-Year Devenir HSA Market Survey,” growth so far from 2016 to 2017 actually surpassed 20 percent. In its 2016 and 2017 surveys, Devenir projects that the HSA market will exceed $50 billion in HSA assets by the end of 2018, and $60 billion by the end of 2019.
Credit Unions Can Drive Their Own HSA Growth
Credit unions can use the open enrollment season to build their HSA portfolios as members select HSA-compatible HDHPs as their health plans for the coming year. Following are tips to help credit unions build their HSA programs.
- Contact local insurance agents and brokers to make them aware of HSA program offerings. Their small business customers may be looking to offer an HSA-compatible HDHP and want to use a local financial organization as the HSA provider.
Credit unions offering a competitive HSA program often find that insurance agents and brokers are happy to refer their clients to a local credit union offering HSAs, especially because not all banks and credit unions offer HSAs. Credit unions that enter into relationships with insurance agents to provide HSA services to their customers often find that this leads to new credit union memberships and the opportunity to offer these new members other credit union services.
- Promote HSA program offerings to small business and self-employed members. These members have already chosen the credit union for their business accounts and lending needs.
Along with access to business credit, small businesses also struggle with the high cost of health insurance. Many are switching to an HSA-compatible HDHP to reduce health care costs. Providing HSA services to these small business and self-employed members can help them reduce costs and improve benefits for their employees. And as employees of these small businesses open HSAs, they help to build a credit union’s HSA program.
- Offer a free HSA educational seminar to help educate members and potential members about the benefits of an HSA. Although the HSA is becoming more popular, much confusion remains, and members may not fully understand the powerful tax advantages an HSA provides.
Credit unions are already a trusted source of consumer financial information so helping educate members about the HSA ensures that members will understand the benefits and avoid the pitfalls. Credit unions that offer retirement planning seminars should include a discussion of how an HSA can be used to save for medical expenses in retirement.
Credit unions have an opportunity to start capturing their share of the HSA market during the open enrollment period. Credit unions that offer HSAs are finding success, with 225 credit unions holding more than $1 million in HSA deposits and 61 holding over $5 million in HSA deposits, according to Devenir.
Ascensus® partners with Devenir to offer the Devenir myHSAinvestments® solution and private-label HSA investment platform to credit unions.