HSAs and Workplace Wellness

HSAs and Workplace WellnessFor companies that are looking to reduce their healthcare costs and help deliver a better quality of life to their employees, 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. 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

Employers offer workplace wellness programs for many reasons. While many are happy to see employees get healthier and live happier, more satisfying lives, the primary reason is to lower their healthcare expenses. Wellness programs have been shown to reduce the cost of company healthcare 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’s perspective, the biggest benefit of a workplace wellness program is the adoption of long-term healthy lifestyle choices and behaviors. 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 excess drinking. They favor wearing seat belts more often – a major factor in reducing crippling or debilitating injuries due to 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

From a financial standpoint, workplace wellness programs can also reduce the cost of healthcare. Healthier people don’t get sick as often, which means less visits to the doctor and less money 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 achieve the benefits of workplace wellness programs, there is one key element – employee participation. While many employees jump at the opportunity to take advantage of an employer-sponsored wellness program, others do not. In order to justify the cost of a wellness program, a large portion of the workforce needs to enroll.

To encourage enrollment, many employers offer rewards which can range from gym memberships to discounts on products and services and even cash. However, even these are often not enough to generate the participation levels needed to make a wellness program cost-effective. As a result, many employers are exploring different ideas to get employees more involved.

One idea gaining traction involves linking employee wellness to HSAs. These tax-advantaged accounts enable employees to pay for a wide variety of qualified healthcare expenses using pre-tax money. In order to have an HSA, employees must be enrolled in a qualified high-deductible health plan (HDHP).

With an HDHP, the employer enjoys lower premiums because employees pay a larger share of their out-of-pocket healthcare costs; thus, as an incentive to enroll in an HDHP, many employers partially or fully fund their employees’ HSA account. The employee gets “free” money from the employer and can use it to pay for qualified medical expenses without paying taxes on it.

Linking HSAs to Workplace Wellness

Linking an HSA to a workplace wellness program can help employers lower plan costs, but it’s a long-term strategy that can 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 medical expenses; fewer medical costs for the employee can help further reduce the cost of the employer’s health plan.

To promote wellness program participation, some employers offer to fund their employees’ HSAs – with a catch. In the first year, an employer might make a contribution (say $1,000, for example) to the account. The following year, the employer might require employees to complete a health risk assessment to receive the $1,000 contribution. Then in the third year, the employer might bump up the requirements by including biometric testing or some other type of health indicator to receive the $1,000 contribution.

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.

Do Workplace Wellness Programs Work?

Studies show that wellness programs offer a very effective tool for reducing costs.

In 2016, EBRI/Greenwald & Associates conducted a survey to measure consumer healthcare engagement with three different wellness programs – biometric screening, a health-risk assessment, and a health-promotion program focusing on a specific health issue.

Results show 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 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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