Employers that contribute to their employees' health savings accounts achieve higher rates of employee participation with the accounts than those that don't.

Company contributions to HSAs have a dramatic effect on employee adoption of the accounts, boosting penetration rates to over 90%, according to Definity Health and Exante Bank.

"Employers are a key catalyst in driving HSA adoption," says John Prince, CEO of Exante Bank, a division of UnitedHealth Group.

"Employers that have contributed have gotten almost double the [HSA] adoption rates. And they don't necessarily have to contribute the same amount of money all the time, because people will roll over the accounts. Bottom line, employer contributions drive the success of the program."

Indeed, other benefits experts agree that it's the initial employer contribution that's vital to the growth and success of HSAs.

"Long term, if employers want their employees to become engaged and be part of the solution to lowering overall health care costs, then they need to share some of that sacrifice with the employee," says Roy Ramthun, president of HSA Consulting Services.

"It's important for companies to reinvest some of those premium savings rather than just pocketing it. Making a financial contribution to an [HSA] is one of the best tools employers have available, and if that means just a one-time contribution, then that's better than nothing."

According to Exante, which studied HSA enrollment patterns of 25,000 individuals, 91% of eligible employees open an account when their employer contributes funds, compared to just 45% who enroll without employer contributions.
Employer funding in the accounts is even more critical for low- and moderate-wage earners, the firm finds.

When an employer did not make a contribution, only 23% of individuals earning less than $25,000 opened an HSA, and 39% of those earning $25,000 to $49,000 opened one.

Comparatively, 50% of those earning $50,000 to $99,000 enrolled without an employer contribution, as did 58% earning $100,000 or more.
"Employer contributions to the account are the single greatest driver in [health savings] account uptake among participants, as well as in overall levels of contribution and balance growth," Exante concludes.

Funding patterns
Large employers (5,000 or more employees) contribute an average of $680 to employees' HSAs, while midsize employers (with 100-4,999 employees) and small employers (with 1-99 employees) contribute more than $1,100 each to HSAs, Exante finds.

Additionally, employers that have adopted a full-replacement HSA program are more likely to make larger contributions ($1,260 on average) than those that include an HSA as one of several health plan options for their workers ($780 on average).
Lastly, the most successful HSA plans incorporate debit cards and other tools, such as deposit products, and sweep functionality to investment accounts, call center support and online management to make it easier for employees to use, Exante concludes.

Debit cards, a feature provided by health insurers, increasingly are being offered by banks.

"With federal legislation raising HSA contribution levels and allowing rollover transfers from IRAs, conditions are right for financial institutions to benefit even more from their HSAs," says John Reynolds, the president of Metavante Health-care Payment Solutions, which is based in Milwaukee and provides banking and payment technology services.

Account holder characteristics
In a separate study, Exante examined spending patterns of HSA users.

"There's been a lot of theories and beliefs regarding HSAs," remarks Prince. "One is that 80% of people are spenders, and only 20% are savers. But now we have data and a statistically valid sample on how accountholders have handled their transactions."
Exante finds that HSA users generally fall into one of three categories:

• Spenders, which make up roughly half of Exante's 290,000 HSA accountholders. Spenders usually carry balances between $400 and $600, spend 80% of the contributions on current medical expenses and contribute an average of $133 per month to the HSA.

• Savers, accounting for about 45% of Exante's HSA users, carry average balances of nearly $1,500 and spend less than 10% of contributions.

• Investors, a small but growing group that comprises about 5% of Exante's HSA population. They are the most active contributors and have the highest total balances: more than $2,000. They tend to maximize yearly funding immediately.

As HSA account holders demonstrate different spending patterns, they could be better served by product choices designed to meet the specific needs of these groups, Exante asserts.

Educating brokers
Such spending data may help benefits experts determine how to best market the accounts to specific groups of employees.

It also would help if brokers and consultants were more educated about HSAs, experts note.

"There are not enough brokers and consultants out there that are in the position to provide the advice consumers need," says Scott Stevens, an employee benefits specialist with NP Dodge Insurance.

Specifically, brokers largely are not aware of how HSAs work, Stevens asserts.
"There are a lot of creative ways to fund and finance these accounts. For example, you can do it on a 401(k) basis — if an employee puts in $500, the employer puts in $500. You can also pre-fund, post-fund or fund-as-you-go, which is the most popular of the three," he says.

Legislation passed by Congress last year increased the amount of money employees and employers can contribute to HSAs and makes it allowable to do a one-time transfer of funds into an HSA from an health reimbursement arrangement or flexible spending account.

This increased flexibility does little good, however, if brokers and consultants don't understand the system.

"I think there's a lot of work that needs to be done," says Stevens.

"Most brokers or agents don't really sit down with their employer and say, 'OK, here's what you should put in the HSA,' or, 'Here are some scenarios and what the financial impact is on your business.'"

Stevens attributes this to a lack of creativity and ambition among brokers. Seeing a need for guidance, Stevens developed a suite of tools called the HSA Tool Kit to help them learn more about the accounts.

In addition, the National Association of Health Underwriters offers a four-hour certification course on consumer-driven health plans. The course is designed for employers, HR professionals and brokers.

"We have a lot of requests, and we're going to be doing this across the country," says Janet Trautwein, CEO of NAHU.

"There's an exam that people will need to pass in order to get their certification. This isn't a fluff course. People can't sit there checking their BlackBerries — otherwise, they won't pass," she adds. —C.S.