As employees think about the affordability of health care now and in the future, 82% see medical costs as their biggest challenge. And yet only 25% rank contributing to a health savings account (HSA) as a top current financial priority, falling below saving for retirement in a 401(k), paying for essential day-to-day expenses and paying off debt, according to a new study by global advisory, broking, and solutions company Willis Towers Watson.

The majority of employees (69%) who didn’t enroll in an HSA say they chose not to because they didn’t see the benefit, understand HSAs or take the time to understand them. HSAs are tax-advantaged accounts that employees and employers can contribute to annually up to certain limits and can be used by employees to pay allowable health care expenses. 

The HSA belongs to the employee, who retains the funds even after retiring or leaving the employer, so employees can utilize HSAs as a retirement savings vehicle in addition to a medical spending account. While HSAs can be a high-value option to help employees prepare for health care costs in retirement, most employees use them primarily as spending accounts for immediate health expenses. Two-thirds of respondents (65%) use their HSA money for current health care needs, large and small, while 8% focus on saving their funds for the future. Because employees regularly use HSAs to pay for current health costs, less than half (45%) have more than $5,000 saved.

“From the data, it appears most employees are missing out on many HSA benefits, including the triple tax advantage, which can be invested to grow throughout their careers,” said David Speier, managing director, Benefits Accounts, Willis Towers Watson.

“In reality, many employees view HSAs as a tool for paying their immediate health expenses rather than a retirement savings vehicle. That may be the appropriate way to use these accounts, especially early in an employee’s career when finances are tight because there is value in an HSA as a short-term spending account and emergency savings.”

Employees’ need for help in deciding how best to use and invest in their health accounts presents a significant opportunity for employers to drive engagement and improve employee understanding of the benefits of an HSA.

Survey respondents say they review their HSA account information frequently; approximately 40% review it monthly and one-third review it quarterly. Nearly half (44%) of employees surveyed say they value quality customer service as the most important feature of an account provider, while online tools and mobile apps were ranked second (22%). These responses suggest employers have a great opportunity to engage employees and enable them to make good “save versus spend” decisions by providing online tools that offer personalization and decision support on the HSA account portal.

“Employees are looking for the best way to manage their health savings and want to understand the trade-offs between saving and spending,” said Speier. “Since employees visit their HSA portal frequently to view and manage their health savings accounts, employers can capitalize on this opportunity to catch their attention by offering tools on the portal — such as retirement savings calculators and health care price transparency services — to help them understand and weigh the benefits of saving, spending or investing the funds in their account.”