An Uphill Road

Getting workers to sign up for health savings accounts can be difficult. Employers should be prepared to invest lots of time and effort.

Monday, May 2, 2005
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Last October, Logan Aluminum introduced health savings accounts to its 1,000 employees, just six weeks before the company's annual open enrollment. Employees were divided into small groups, handed written materials about HSAs, then given hour-long presentations conducted by the company's HR department.

About 2 percent chose HSAs, says Howard Leach, vice president of HR at Russellville, Ky.-based Logan, which manufactures beverage cans. He'd anticipated that number would be somewhere in the double-digit range.

Looking back, Leach suspects that the disappointing sign-up rate may have been the result of the company's failure to give employees sufficient time to learn about HSAs.

"The complexity of HSAs really requires extensive communication," he says. "If I had to do it over, I would consider starting the process a little earlier than we did and offering additional communication."

Created as part of the 2003 Medicare Reform and Drug Benefit Act, HSAs are an alternative to traditional health insurance. In order to qualify, employees must first be covered by a high-deductible health plan, with a minimum deductible of $1,000 for individuals and $2,000 for families. Eligible employees can contribute money into an HSA on a tax-free basis to pay for out-of-pocket medical expenses and save for future medical bills during their retirement. Employees can roll over the account's funds when they change jobs and invest them in a variety of financial vehicles such as stocks, bonds, mutual funds and certificates of deposit.

Although HSAs help employees save money, pay less tax and control their health-care dollars, introducing HSAs is turning out to be HR's latest headache. Confusing rules, along with employee cash-flow issues and the fact that few people can predict their future health-care needs, are causing many workers to reject the plans. As a result, companies are trying all sorts of tactics to persuade them to take a second look.

They certainly have their work cut out for them. Many employees have never heard of HSAs or understand how they work, according to a survey by Watson Wyatt Worldwide, a global HR consulting firm based in Bethesda, Md. Last November, the firm surveyed 1,000 people who represented a cross-section of the American population. Only 29 percent said they had heard of HSAs, while 61 percent had not and 10 percent were unsure. Of those who'd heard of HSAs, 33 percent completely or mostly understood how they worked, while 34 percent said they "somewhat" understood them and the remainder said they either didn't understand them or weren't sure. (See chart on page 37 for additional results from the Watson Wyatt survey.)

The survey also found that awareness varies by gender, income and health status: Thirty six percent of men and only 24 percent of women are familiar with HSAs, while 14 percent of individuals who earn less than $35,000 had heard of HSAs compared with 41 percent who earn more than $75,000. Meanwhile, participants in very good or excellent health are more likely to have heard of HSAs than participants in fair or poor health (35 percent and 23 percent, respectively).

Death and Deductibles

"It's hard enough for employees to pay attention to their own benefits from their own company, let alone some theoretical benefit that may be offered at some point," says Valerie Wedin, a health-care communications consultant at Watson Wyatt's Minneapolis office.

She compares the process of teaching employees about HSAs to sociologist Elisabeth Kubler-Ross' "five stages of death" (denial, anger, bargaining, depression and acceptance). HR must use a staged approach, starting with building awareness, providing education in digestible portions and personally engaging employees by offering detailed scenarios or examples.

People can't be expected to move through all of the stages at once anymore than they can quickly accept death, says Wedin.It's also critical to involve a company's key leaders, judging by the results of a 2004 joint survey conducted by Watson Wyatt and the National Business Group on Health. The survey, which focused on what drives enrollment when an account-based plan is offered as an option, found that involving the CEO and CFO made a "striking difference" in enrollment rates and that involving front-line HR staff also produced a positive impact.

Wedin says HR can create employee communications signed by the company's top leaders and ask them to attend employee meetings that address HSAs or distribute broadcast e-mails promoting them. HR can also gather testimonials from employees with HSAs who believe these accounts work well for them, then use their stories to build participation the following year.

The sooner HSAs are announced to the workforce, the better, says Helen Darling, president of the National Business Group on Health in Washington. The same joint survey also showed that earlier communication--more than six months in advance of enrollment--increased the number of employees choosing such plans to almost 25 percent. But when introduced less than four months in advance, enrollment dropped to single digits.

"Recognize that rolling out something new like this is going to take more money and effort because it's so complicated," she says, adding that half of her organization's 330 members are either currently offering, or plan to offer, HSAs by next year. "This is a live experiment with real people."

In fact, HR might want to focus on itself first when it comes to education. Paul Devore, CEO of Financial Management Services Inc., an employee-benefits consulting and brokerage firm in Los Angeles, says he was struck by the confusion exhibited by many HR attendees during question-and-answer sessions on HSAs at industry conferences he recently attended.

The experiences convinced Devore that many HR people have only a dim grasp of how HSAs work--a situation they must rectify before they can answer the questions they'll face from employees, such as: "Which vehicle should I invest my money in?" or "What happens if I have $600 in my account but my medical bills total $900?"

"You really need to understand the pros and cons [of HSAs] before jumping in, because it could come back to bite you if you don't do this right," he says.

Car Payments or Health Care?

Annette Watts, vice president of HR at Budco, a marketing and distribution company in Detroit, isn't sure whether her company will offer HSAs to its 850 employees.

"This could be an uphill battle, depending upon the type of staff you have," she says. "We'd have to sit back and think how we really want to market this across the board, not just for our highly compensated individuals."

Watts is chiefly concerned about production workers at the company who earn $8 or so an hour, whom she says would rather use their paychecks for immediate necessities such as car payments instead of saving for future medical bills that may never materialize. The company would have to provide financial incentives and, possibly, budgeting tips to promote plan participation among these workers, who probably wouldn't otherwise consider HSAs, she says.

Such concerns are hardly unique to Budco. Many employees are unsure of their ability to pay the high deductibles associated with HSAs, says Jennifer Murphy, lead health-care communicator at Hewitt Associates in Lincolnshire, Ill. Some are afraid the funds can't be used for wellness exams or other treatments. Others falsely believe that HSAs are only suited for people who are healthy and wealthy.

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Murphy says clients that have garnered the most positive results introduced HSAs at least six months in advance of open enrollment, provided their employees with online decision-support tools that let them model what their expenses might be with an HSA and periodically distributed communications that featured plenty of graphics and employee-friendly content. Some of the most effective tools have turned out to be videos featuring "people-like-me" examples, she says.

"We're finding that there's no substitute for video when it comes to helping explain real-life scenarios employees can relate to," Murphy says, adding that the videos--which the companies produced themselves in partnership with their benefits consultants--typically present three different examples ranging from healthy, single employees to those married with children. "What employees really want to know is how [HSAs] work when they go to the doctor's office or get a prescription filled. Tell them the steps they have to go through and how this is going to be different from what they're doing today."

Of Benefits and Snowplows

Still, most people choose health benefits with their hearts, not with their heads, says Sandy Walters, executive vice president at Kelly & Associates Insurance Group, a benefits-consulting firm in Baltimore. He says people are conditioned to believe they need top-of-the-line health benefits even if they've never been seriously ill or hospitalized.

"You have to change the whole attitude of people," he says. "You have to get them thinking about [health care] in a more economical way. Everybody doesn't need a Chevy or a Cadillac."

He often tells employees the following story to demonstrate this point: When it first snows, people complain about their street not being plowed. But if they each had to pay $25 every time the city plowed their street, they would say, "There's not enough snow yet. Wait until we have six inches."

Some of Kelly's clients are adopting the firm's eight-month, 10-step introductory plan: Introduce the concept of employees managing their own health-care dollars, explain consumer-directed health care, address HSAs as a savings vehicle, describe high-deductible health plans, offer online tools and resources, cover frequently asked questions, discuss how employees can build their HSA accounts and invest their money, describe all of the employer's health-care options, review key points and then conduct open enrollment.

"This really isn't just a different health plan," Walters says. "It's a new direction. Employers who quickly introduce this are just doing this for their top execs and adding this plan as an investment vehicle."

Leach says he hopes at least 25 percent of Logan Aluminum's workforce will choose HSAs within the next two years. "From a company perspective, we really believe HSAs have value," he says. But to meet this goal, he adds, HR will have to step up its communication efforts.

For example, HSAs will now be addressed at all team meetings by HR's employee-relations representatives. Employee meetings will also be scheduled in the early mornings and evenings so spouses can attend, freeing employees from the burden of trying to explain HSAs to family members when they themselves may not fully understand the concept, says Leach.

North Shore-LIJ Health System in Great Neck, N.Y., introduced HSAs last year to its 35,000 employees. Almost 1,000 signed up, says Kathleen Gallo, the health-care provider's senior vice president of HR and chief learning officer. Gallo and her staff used a variety of marketing tools to explain HSAs: payroll stuffers, letters sent to employees' homes, promotional posters on cafeteria walls, town-hall meetings and toll-free help lines.

"We [don't] have all the answers," she says. "But the more consistent the communication model is around important issues, the less confused employees will be about what they need to do."

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