Better HSA Participation Through Behavioral Economics

HSA, behavioral economics
Help employees get to love their HSAs.

By leveraging the tenants of behavioral economics, 401k advisors and plan sponsors can help plan participants become more engaged and make better choices that will lead to better outcomes–particularly when it comes to taking advantage of health savings accounts (HSAs).

That’s the gist of a new white paper from Boston-based Bend Financial, which provides HSA and financial wellness solutions to individuals, employers and organizations in the group benefits distribution market.

Irrational financial behaviors, combined with a general lack of understanding of HSA advantages by non-funders, has traditionally made increasing enrollment rates among employees difficult.

The white paper, “Encourage Greater Health Savings Using Behavioral Economics,” discusses the role of behavioral economics in employee decision-making and the insight and strategies needed by employers to help drive better engagement.

“Lack of financial literacy is an epidemic in the United States, making it more important than ever for organizations to arm themselves with the tools necessary to make positive changes in the financial lives of their employees,” said Tom Torre, president and CEO of Bend. “By leveraging behavioral economics, employers have the unique opportunity to increase HSA adoption, improve program engagement and influence positive decision-making for employees.”

A new report from the Federal Reserve shows the average American still struggles to save money for rainy days or emergencies, especially health-related emergencies. For many, this often leads to untreated ailments, delayed care or neglected prescription refills, making the overall health of employees worse and the cost to treat and insure them higher.

Many employers today have access to or currently offer benefits and solutions to help employees better understand their money and save appropriately for health-related costs. The challenge is that many employees don’t understand the benefits offered and don’t see the true value these benefits can have on their financial health.

To better frame the issue, consider the following statistics from the white paper:

  • Only about one-quarter of eligible employees enrolled in an HSA are using it, often because they don’t see the benefit or understand its purpose.
  • More than one-third of activated HSAs received no contributions in 2017, according to EBRI.
  • 65% of those who participate or contribute to an HSA aren’t using it as an investment vehicle.

For companies looking to encourage greater HSA participation, behavioral economics has proven to push people to be more engaged and to make better choices about health savings. From creating incentives to nudge messaging to creating a path of least resistance, there are many ways for companies to influence positive decision-making for their employees.

The white paper says these tenants of behavioral economics—when leveraged properly—will better encourage and simplify health savings for employees of all backgrounds and shorten their journey to financial wellness.

By understanding these influences on behavior, 401k advisors and plan sponsors can begin to make changes to the way they structure and deliver information, to better help employees make positive health savings decisions that can get them on the path to financial wellness.

Brian Anderson Editor
Editor-in-Chief at  | banderson@401kspecialist.com | + posts

Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.

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