3 ways HSAs help employees battle inflation Skip to content

3 ways HSAs help employees battle inflation

Restaurant owner sits at a counter to work on his budget

Mention inflation in a conversation and it’s almost a guaranteed buzzkill and instant stressor. Inflation, or rising prices for goods, is a prominent concern across the country. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 6.4 percent over the last year for all items. When the CPI increases, it indicates inflation and a decrease in a dollar’s purchase power. Today’s dollar buys fewer items than a year ago. You can almost hear the pennies crying and see wallets shrinking.

Even if the rate of inflation has slowed, it’s a topic that will likely have ripple effects and be top of mind for months to come, especially for lower wage earners. A recent Gallup poll found 15 percent of Americans say inflation is the second most important problem in the country. Across-the-board, Americans care about inflation as household budgets stretch to buy the basics. When this happens, not only are people less likely to save money, but they may accumulate more medical debt.

Assistance with managing medical expenses is where we can play a role, especially when it comes to how Health Savings Accounts (HSAs) make healthcare more affordable.

What employers and employees have in common, and where they differ

If inflation is such a common worry, why is there a difference in how employers and employees view the issue? It’s likely a matter of perspective. To dig into both employer and employee concerns, 8 Acre Perspective, an independent marketing research firm, gathered insights from benefits leaders in September to October of 2022, and then during the time period of November to December of 2022, surveyed over 1,000 full-time employees who receive health insurance from their provider. The findings show stark differences in how Human Resource (HR) leaders and talent view inflationary pressures.

Employee inflation worries extend to healthcare and benefits

The 8 Acre studies revealed that 74 percent of workers are concerned about inflation and 43 percent are worried about rising healthcare costs. The study also shows that lower earners are more likely to say inflation has required tradeoffs between healthcare and other expenses. The employees surveyed indicated they are also less likely to agree their employer has kept benefits affordable during inflation.

Are employers unfazed by inflation?

Contrasted with how employees view rising costs, only 7 percent of HR leaders cite inflation as a top concern. This is a concerning statistic, as low-wage earners are more likely to be affected by the costs of inflation and rising healthcare costs. In fact, nearly half (45 percent) of employees agreed that they can’t take full advantage of their benefits because of affordability.

Why is this a big deal? Ultimately, this difference in priorities could potentially put organizations at risk of losing talent. For example, 45 percent of workers believe better benefits would make them more likely to stay with their current employer. And 54 percent said that they would be willing to take a lower salary in exchange for better benefits.

Wait. Let’s go back to the 7 percent. Does this mean employers don’t care about inflationary pressures? No, not at all. On the contrary, the research found that one in four HR leaders indicate that lower-wage earners are under-served by their organization’s benefits. And more than 8 in 10 HR leaders believe consumer-driven benefits (CDBs) can help employees battle inflation. This reveals what we knew all along—employers are invested in addressing the root cause of employee concerns on healthcare affordability and see value in the ways CDBs, especially HSAs, can be part of the solution.

1. HSA benefits can help bridge the gap

To help your workforce combat inflationary pressures, consider implementing a health savings account (HSA). An HSA allows employees to set aside pre-tax money to pay for qualified medical expenses. This can be beneficial for every employee, but also for lower-wage earners as it allows them to save money on healthcare costs.

HSAs are an individually-owned savings account where employees and employers can contribute money to cover qualified medical expenses. Funds are not subject to taxes when contributed, and employees can use the funds for qualifying health-related expenses tax-free as well.1 Additionally, employees can earn tax-free interest on the funds in the account, and the entire remaining HSA balance rolls over each year.

An HSA can be especially helpful when trying to save up for larger expenses like braces, or even just regular medical expenses like checkups and vaccinations. The funds saved through an HSA can also be used to pay for over-the-counter medications and co-pays.

Did you know there are ways to design a health plan to support needs of employees across the income spectrum? Read about how Pfizer partnered with HealthEquity to create a post-deductible HSA plan with prescription coverage and funded according to a tiered model. Pfizer colleagues are separated into one of four tiers, based on the annual base pay. Colleagues who are lower paid are given the most seed money.

2. Remember the HSA tax advantages

HSAs are also attractive because the money saved is tax free. Contributions to an HSA are tax deductible, and any money distributed from the account to pay for qualified medical expenses is also tax free. This means that any money put into the account is not subject to taxes, so it can be a great way to save money while still taking advantage of the tax benefits.

Overall, Health Savings Accounts offer a great way to save money for medical expenses. The money saved is tax free, so it can be an ideal method of maximizing savings while still taking advantage of the tax benefits.

3. Empower people to take control of their health

HSAs help transition your employees into a more consumer-driven healthcare mindset. Consumer-driven healthcare means employees take more of an active role in their healthcare decisions, including shopping around for the best, lowest-cost care and prescriptions. This approach, coupled with proper education and engagement, can help employees make wise healthcare decisions and ultimately save money. Saving money? Yep, that’s a key part of conquering inflation.

Employers face affordability issues too

We get it. Inflation squeezes everyone. It’s not just workers who feel the pinch of rising costs. Our research revealed that benefits cost containment is a top concern for 60% of HR leaders. Half feel they are trying to purchase a steak dinner on a spaghetti budget. If that’s how you feel too, all is not lost.

For employers, one of the perks that comes from offering an HSA benefit is that they can be paired with health plans that typically have lower monthly health insurance premiums. Premium savings can then be used to incentivize employees via their HSAs.

There’s another way HSAs can help solve this complex problem. HSAs provide employers with a tax advantage. Employers benefit from additional FICA and Medicare tax savings on money contributed to employee HSAs. HSA-qualified health plans might be a less expensive way for you to provide the health-related benefits that employees have come to expect from their employers. And, all considered, could allow you to offer more generous benefits to your employees. Overall, when inflation bites at your bottom line, HSAs can help you bite back with more ways to provide competitive benefits to your employees.

Making smart healthcare decisions to fight inflation

To recap, when it comes to inflation, we’ve all felt it. Not only will money worries likely persist for a while longer, people making less money may feel the stress more acutely.

As inflation persists, employers and HR leaders face the challenge of providing competitive and affordable benefits to their employees. There are several ways employers can be more conscious of the financial needs of their employees to provide adequate benefits. Wrapping this all up in a cost-effective bow, implementing an HSA benefit can be beneficial for both employers and employees, as it can help to offset the costs of inflation.

1HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax-deductible with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.

HealthEquity does not provide legal, tax or financial advice. Always consult a professional when making life-changing decisions.

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