Just as retirement plans shifted from employer funded defined benefit (DB) plans to employee funded defined contribution (DC) plans like 401(k)s, health care benefits are making a similar shift moving to high deductible health care plans (HDHP). But the key element to making HDHPs work are HSAs which provide supplemental benefits and offering huge tax savings. And though more people are taking advantage of HSAs with accounts and assets growing, a new report shows that many people in HDHPs are not taking advantage.
Devenir Research reported that assets in HSAs grew to over $30 billion by the end of 2015, a 25% increase over 2014 and the number of accounts grew by 22%; the average account balance topped $14,000. Experts predict that HSAs should grow by 22% in 2016 and are estimated to top $50 billion by 2018.
At the same time, research by Benefitfocus, a cloud-based benefits manager showed that a majority of companies on their platform offer HDHPs which is most popular among Millennials with 44% using them. But Benefitfocus also noted that not all of these people are taking advantage of HSAs or other voluntary benefits that supplement HDHP like critical illness, hospital indemnification and accident insurance.
This convergence of health, retirement and insurance related benefits offered at work offers challenges and opportunities for employers and their advisors. Helping people to understand these benefits is more critical when they have to decide which ones to fund, a decision that had been made for them in the DB/employer funded world. But more important than education is helping people make the right decisions for them and their families. Some providers are setting up private exchanges as well as helping people make these critical benefit decisions in the new employee funded world in which HSAs play a critical element
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