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Benefits

Educate employees who are new to the workforce about HSAs and FSAs

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For employees who have spent most of their lives covered by their parent’s health insurance, turning 26 can be scary, as they are faced with making benefits decisions on their own for the first time. Considering the fact that more than half of consumers – regardless of age – report feeling “totally lost” navigating healthcare, there are significant opportunities for employers to help early-stage workers make informed decisions about everything from coverage options to how much they should contribute to a health savings account (HSA) or flexible spending account (FSA).

In general, younger employees tend to be low-volume users of health care with their exposure limited to annual preventive exams, dental visits and vision care. That’s why helping them maximize their benefits and their healthcare dollars requires education on the basics, starting with what your organization offers, the meaning of terms like deductible and copay – which many consumers fail to fully grasp – and how decisions they make during open enrollment may affect them in the coming year and beyond.

To begin, demonstrate how your employee benefits portal works and encourage employees to use it regularly. Then help them identify their needs by telling them to think about things like allergies they may have that require medication or medical care, sports or other activities outside of work that might cause them to need medical care, any interests they may have in improving their physical or mental health, etc. Encourage them to rely on your company’s HR team and their plan administrators for more detailed support.

How FSAs and HSAs can help

As you plan these employee communications, keep in mind that most people prioritize their benefits decisions in the following way:

  1. Medical: Health insurance is second only to salary as an element of employee compensation. And premium costs in recent years have outpaced inflation and, in many cases, grown faster than wages. Help employees calculate how much they will pay in premiums and explain that they won’t get that money back if they don’t use any medical services. Introduce them to options like FSAs and HSAs, which allow them to use pre-tax money to pay for out-of-pocket expenses that will help satisfy a deductible. Encourage them to contact your HR team for specific rules that may apply here.
  1. Dental: Healthy teeth are important, and not just for chewing food. Yet while 87% of people agree that bad teeth can negatively impact someone’s personal or professional life, 77 million Americans do not have dental insurance, and Americans are more likely to maintain their car regularly than visit the dentist twice a year. In some cases, employees may simply not understand that dental care isn’t covered by health insurance. Explain the basics of dental care, and that, as with health care, they can use pre-tax HSA or FSA contributions to pay for dental expenses or orthodontia.
  1. Vision: Vision insurance can cover the cost of expenses that are not covered by standard health insurance, like eye exams, glasses and LASIK surgery. As such, its value will depend on how frequently an individual uses these services. And while costs for eye care haven’t increased at the same rate as health insurance, rates appear primed for significant growth this year. If an employee gets an eye exam once a year and doesn’t need glasses, they might benefit from using FSA or HSA contributions to cover vision expenses rather than paying for vision insurance. And if they do require vision correction, they may be interested to learn that prescription sunglasses are considered an eligible expense covered by their FSA or HSA.
  1. FSA/HSA: Even with great coverage, an FSA or HSA can reduce an employee’s taxable income while helping them pay for out-of-pocket costs not otherwise covered by their health plan, as well as everyday items that they already purchase such as sunscreen, over-the-counter medications for pain or allergy relief, birth control or high-tech health devices. Educate employees about how these accounts work, what’s eligible and connect them to an interactive calculator that will help them estimate their potential expenses and make informed decisions about their contributions.
  1. Life insurance: Young and healthy employees might not have life insurance on their minds yet, but there is good reason for them to at least consider it. For example, if their parents have cosigned for a significant expense they may have incurred, such as a student loan, the cosigner would be responsible for that debt in the event of the employee’s death. While this is difficult for employees and parents to think about, purchasing life insurance and listing their parents as beneficiaries would help cover those costs.
  1. Disability: As with life insurance, disability insurance isn’t likely to be top of mind for younger employees who may see themselves as invincible. However, encourage them to consider what might happen if they break an ankle or injure their back and are unable to work for weeks. With a significant enough injury, they could exhaust their PTO and lose their income until they are well enough to work again.

Benefits can be confusing even when you’ve had years of experience managing them. For employees who are turning 26 and making many of these decisions for the first time, it can be overwhelming. By getting ahead of these decisions and helping employees understand both their needs and their options, employers can ease that anxiety while helping employees make the best decisions for their specific situation.

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