Human Capital & Careers

Employers Embracing Health Savings Accounts

Many say they're likely to offer the vehicles, which resemble individual retirement accounts.
Stephen TaubApril 30, 2004

Employers appear to be warming quickly to the concept of the health savings account (HSA), an IRA-like vehicle made possible by the enactment of the Medicare reform law last December.

According to a new survey by Mercer Human Resource Consulting, 73 percent of 991 employers say it is either very likely (19 percent) or somewhat likely (54 percent) that they will offer an HSA along with a so-called high-deductible health plan by 2006.

Employees can use the accounts, which are portable and funded with pre-tax dollars, for current medical expenses or as a savings vehicle for future health-care costs. They must be offered in tandem with a medical-benefits plan carrying a deductible of at least $1,000 per individual or $2,000 per family.

The largest and smallest companies are the ones most interested in offering HSAs to their employees, according to Mercer. Among companies with 20,000 or more employees, 81 percent said they are very or somewhat likely to offer the accounts by 2006, while 78 percent of companies with 10 to 49 employees said they felt that way.

At companies with 500 or more employees, the top two reasons to offer an HSA are to promote employee involvement and accountability in purchasing health-care services (80 percent) and to reduce or control the organization’s spending on health-care benefits (74 percent), according to Mercer. Companies with 10 to 499 employees cited the same top two reasons, but in reverse order.

Another possible reason is the use of HSAs for post-retirement medical coverage, cited by 48 percent of companies with 500 or more employees. Indeed, 53 percent of companies that currently sponsor retiree health plans and 40 percent of non-sponsors say they are interested in that use of HSAs.

Despite the newness of the HSA program, 21 percent of all surveyed companies — and 42 percent of companies with 20,000 or more employees — said they have been asked about the accounts by their workers.