Ask an Adviser: How can we reframe our HSAs to support DEI efforts?

Welcome to Ask an Adviser, EBN’s weekly column in which benefit brokers and advisers answer (anonymous) queries sent in by our readers. Looking for some expert advice? Please submit questions to askanadviser@arizent.com. This week, we asked Jake Spiegel, a research associate of health and wealth at the Employee Benefit Research Institute (EBRI), to weigh in on the following: How can we reframe our HSAs to support DEI?

Health Savings Accounts (HSAs) are a useful way for people enrolled in HSA-eligible health plans to save for medical expenses. The powerful triple tax advantages they offer enable account holders to stretch their healthcare spending dollars further than they would otherwise go. However, not everyone uses HSAs optimally. 

Read more: 5 experts and advisers discuss the pros and cons of HSAs

EBRI research found that lower-income account holders, female account holders and — proxying ZIP code for race — Black and Hispanic account holders have systematically lower contributions and smaller balances than their counterparts who are higher-income, male, white or Asian. For example, white account holders had an average contribution of $1,806 and an average balance of $5,005 in 2020, compared to $1,312 and $3,439, respectively, for Black account holders. Unfortunately, the disparities do not end there.

Black, Hispanic, women and lower-income people disproportionately suffer from a number of health inequities, such as obesity, diabetes and lower life expectancies, even after controlling for socioeconomic variables. While HSAs can help account holders stretch their healthcare spending further and could blunt the effects of these inequities, the underutilization of HSAs threatens to reinforce and exacerbate these inequities. With that in mind, how can we foster better HSA utilization?

Read more: How this benefits company prevents unnecessary medical procedures and prescriptions

One avenue worth exploring is employer contributions. EBRI research has shown that they help account holders build larger balances. For example, the average total contribution of an account holder who had the benefit of an employer contribution was $2,834 compared to $2,320 for those without an employer contribution. Higher average contributions help account holders build larger balances, and a larger HSA balance can help account holders be better prepared for future medical expenses.

Importantly, we find that account holders who receive an employer contribution actually contribute slightly less than those who do not have that benefit. The average contribution for an account holder without an employer contribution was $2,320 compared to $1,970 for an account holder with an employer contribution. 

This is not in itself bad, since it allows the account holder to divert those funds they would’ve allocated to their HSA to where they might need them most: retirement savings, emergency savings, or saving for another goal. While there’s no magic wand to wave that will make health inequities vanish, employers may be able to blunt the effects of health inequities by providing contributions to their workers’ HSAs.