Worksite wellness programs have grown in prevalence, yet their promises of gains from lower health insurance utilization and increased productivity are under realized for most. Employers of choice or highly desirable work environments, however, have identified the barriers to realizing these gains and are employing a strategy that encourages employees to secure rewards in health and wealth.
A 2012 study by Rand Corporation revealed that 69% of employers with more than 50 employees offered wellness programs and three fourths of these included incentives to encourage participation. On average, the study stated the annual difference in savings after five years of program participation is an estimated $157 per participant, which is not statistically significant given both the time and financial investments often required to design and operate such programs. Despite continued increases in the variety of programs, the need for more participants and better outcomes remains.
Beating the averages
Employers of choice continue to recognize the intrinsic, cultural value of offering employees additional sponsored resources and programs. Many have expanded this focus through investments in employee financial literacy programs. They are tooling employees to unlock gains in productivity and reductions in health care spending.
According to the American Psychological Association, more than three out of five Americans cited “money” as their biggest cause of stress—accounting for 70-95 percent of doctor visits. The most commonly reported symptoms of stress are anger, anxiety, low motivation, fatigue, depression, and exasperation—conditions that are exacerbated by the sedentary and unhealthy behaviors that employees engage in as a way of managing stress. Compounding these consequences for many are unpaid medical bills, which are the number one cause of bankruptcies in the U.S., outpacing credit card bills and unpaid mortgages, according to NerdWallet.
Even employers of choice are struggling with severe increases in health care costs, causing many of them to shift these expenses onto employees in the form of higher deductibles. The Kaiser Family Foundation's 2015 Employer Health Benefits Survey found that the average deductible amount for workers with such plans has nearly doubled the past decade, increasing from $584 in 2006 to $1,318 this year. Additionally, in spite of consistent cost-shifting, premiums still continue to climb, increasing by over 52% since 2005.
Best practices and sound strategy
By encouraging greater financial fitness, employers of choice have positioned their employees to capitalize not just on traditional post-retirement savings vehicles, such as a 401k, but on health savings accounts (HSA) as well. Much like a 401k, these employer-sponsored programs establish a tax-sheltered environment where employees can reserve pre-tax income in an interest-bearing account dedicated to funding eligible health care expenses, as long as their underlying plan design carries the minimum qualified deductible amount of $1,300 for individuals and $2,600 for families. Any money in an HSA grows tax free, is portable for the employee, carries no “lose it or use it” component, and can be withdrawn tax free as well, providing it is used for qualified medical expenses. Best of all, the money secured in an HSA does not need to be used the same year as contributed and, after age 65, it can be withdrawn for nonmedical expenses subject to ordinary income tax.
Employees who may be 25 or more years away from retirement might not appreciate HSA’s long-term value of post-retirement savings for Medicare premiums, copays, deductibles, and even long term care. Employers have experienced comparable pushback when encouraging younger and lower paid portions of their workforce to contribute to 401k plans. At the same time, many of these same employee segments will over-insure (and over-pay in premium) on healthcare when provided multiple plan choices, due to a lack of education, cost transparency, and general understanding of insurance principles. These complications truly reveal the importance of a sound and comprehensive communication strategy to drive the success of a well-rounded program that includes not only financial fitness, but illustrations and comparisons of all available short- and long-term vehicles for cost savings.
In other words, an HSA, combined with a sound communication strategy that includes a financial literacy offering, can relieve financial stress in the short term by providing a pre-tax vehicle that funds medical expenses. In the long term, HSAs can truly deliver added savings and interest that can be enjoyed by workers in retirement, while offsetting the significant burden of financing post-retirement healthcare, which can cost upwards of $220,000, according to Fidelity.
In an era when employers are faced with the increasing strategic challenge to retain and attract the best talent, a well-rounded program that honors financial wellness can go a long way in easing employee stress and shaping a more productive workplace culture. •