HSAs and Workplace Wellness

HSAs and Workplace Wellness

For companies wanting to help deliver a better quality of life to their employees while reducing their own health plan costs, a workplace wellness program coupled with an HSA-eligible HDHP could be the solution.

Employers offer workplace wellness programs to help employees make better lifestyle choices and improve their health. As of 2020, 80 percent of large U.S. employers offer workplace wellness programs covering over 50 million employees.

Part of a broader movement to control healthcare costs by helping people become better consumers of healthcare, wellness programs have three specific goals in mind:

  • Support healthy behavior in the workplace
  • Improve health outcomes
  • Lower employer healthcare costs

These programs are gaining in popularity because they offer benefits to both employers and employees. Increasingly, employers are linking them to Health Savings Accounts (HSAs) as a way to increase participation in both.

Benefits to Employers

While many employers are gratified to see employees get healthier, happier and live more satisfying lives, their primary reason of offering a wellness benefit is to lower the firm’s healthcare expenses. Wellness programs have been shown to reduce the cost of company health plans as well as worker’s compensation insurance. Other benefits to employers include:

  • Reduced absenteeism
  • Increased productivity
  • Healthier, happier employees with higher job satisfaction
  • Less workforce turnover

Benefits to Employees

From the employee perspective, the greatest benefit of workplace wellness programs is the adoption of long-term healthy lifestyle choices and behaviors. For example, a 2019 study by Harvard University found that employees reported higher rates of regular exercise (8.3%) and active weight management (13.6%) at worksites offering a wellness program than at worksites that did not.

People engaged in wellness activities tend to look and feel healthier, and have a more positive attitude and outlook on life. They eat healthier foods, exercise more often, smoke less and avoid excessive drinking. They wear seat belts more often – a major factor in reducing crippling or debilitating injuries from car accidents. In addition, they’re better at controlling stress levels, which helps reduce other types of health problems.

Workplace wellness programs can also reduce chronic disease by lessening the symptoms that cause them. For example, exercising, quitting smoking and eating a healthier diet all contribute to lowering cholesterol and blood pressure levels. In turn, these factors can reduce the chances of heart attack and other types of heart disease.

Employee Financial Benefits

Workplace wellness programs can also reduce the cost of healthcare to employees. Healthier people don’t get sick as often, which means fewer visits to doctors and less spent on medications and other healthcare expenses. In addition to better health and lower healthcare costs, wellness programs offer many other important benefits, including:

  • Improved mental health, including less depression
  • A sense of community and connection with co-workers
  • Greater job satisfaction
  • A sense of accomplishment

HSAs and Wellness Programs

To maximize the benefits of any workplace wellness program, there is a key element – employee participation. While many workers jump at the opportunity to take advantage of an employer-sponsored wellness program, others do not. In order to justify the wellness program’s cost to the employer, a large portion of the workforce needs to enroll.

To encourage enrollment, many employers offer rewards, such as gym memberships, discounts on products and services, and sometimes cash. However, even these may not be enough to generate the participation levels needed to make a wellness program cost-effective. As a result, many employers are exploring different ways to get employees more involved.

One idea gaining traction involves linking employee wellness to HSA accounts. These tax-advantaged accounts let employees pay for a wide variety of eligible healthcare expenses using pre-tax money. In order to open and contribute to an HSA, employees must be enrolled in a qualified High Deductible Health Plan (HDHP).

With an HDHP, the employer pays lower premiums because employees pay a larger share of their out-of-pocket healthcare costs in the form of a larger deductible. In that situation, as an incentive the employer may partially or fully fund HSA accounts for employees who enroll in an HDHP. The employee gets “free” money from the employer and can use it to pay for qualified medical expenses without paying taxes on it.

Many studies have shown that employees with HDHPs are more likely to research the cost of healthcare services than those with traditional health plans. They also participate in wellness programs at a higher rate, and are more aware of the incentives offered to encourage enrollment.

Linking HSAs to Workplace Wellness

To promote wellness program participation, some employers offer to fund their employees’ HSAs – with a catch. In the first year, an employer might contribute a certain sum to the account (for example, a $500 contribution). The following year, the employer might require workers to complete a health risk assessment in order to receive another $500 contribution. Then in the third year, the employer might increase requirements by requiring biometric testing or some other type of health indicator to receive another $500 contribution.

Linking HSA accounts to a workplace wellness program can help employers lower their health plan costs, but it’s a long-term strategy that may take several years to generate meaningful returns. Once employees learn to develop healthier lifestyles by participating in the workplace wellness program, they can decrease their healthcare expenses. Fewer medical expenses for the employee can further reduce the cost of the employer’s health plan.

Keep in mind that participation in workplace wellness programs must be voluntary. In addition, there are limits on the amount of incentives employers can provide, and some incentives are taxable. However, as employees become more engaged with their personal healthcare – through the HDHP and wellness programs – their medical expenses usually trend downward.

Linking a High Deductible Health Plan to a wellness program won’t provide a cure-all for lowering health plan costs. But for employers seeking to lower plan costs by having more employees engage in a workplace wellness program, it can be an effective part of a larger solution.

DataPath, Inc. is a leading innovator of benefits administration solutions. Our cloud-based Summit platform features all-in-one HSA administration, including simplified account management, custodial banking, and investments.

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