Are your employees ready for a $5,000 medical bill?

Key takeaways:

Most employees are not financially prepared for a large medical bill: a single emergency room visit, hospital stay, or chronic condition diagnosis can easily cost $5,000 or more out of pocket.¹
Health Savings Account (HSA) holders are better positioned than non-HSA holders, being 16% more likely to have more than $5,000 saved.¹
Younger employees are especially vulnerable: more than one-third of Gen Z and Millennials say they would skip preventive care to save money, even when it is likely covered by their plan.¹
Employers can close the gap by seeding HSA contributions, offering Health Payment Accounts (HPAs)² with zero interest, and educating employees on using their HSA as an emergency healthcare fund.

Do you remember the first time you got a large, unexpected bill in the mail? It is a horrible feeling to know you cannot cover something essential when you have not saved for it.

Now, imagine that feeling, but it is while you are sick or injured. This is the reality for the majority of Americans, and that includes your employees. Are they actually ready for unexpected healthcare costs?

For context, let us look at some common out-of-pocket healthcare costs (and how quickly they can add up).

The annual cost for a person with Type 2 diabetes ranges between $3,300 and $4,600.³
An emergency appendectomy can range between $3,000 and $8,000 even with insurance coverage.⁴
Two-night in-patient hospitalization can rise to $6,200.⁵

Whether it is a chronic condition, a surprise illness, or even a car accident, your employees can face healthcare bills of $5,000 or more at any age. And if they happen to go out of network or span more than one calendar year, it is even more of a hardship.

I have been looking at the data, and while there is some great news about Health Savings Account (HSA) holders, there is also a gap we need to close.

HSA holders feel confident in their benefits understanding

First, let us give credit where it is due. Your efforts to educate employees are working. When people sign up for an HSA, they are not just checking a box; they are engaging with their financial health.

Our Healthcare Affordability Pulse ¹ report found:

64% of HSA holders say they understand their benefits extremely or very well.
Only 44% of non-HSA holders say the same.

This tells me that the people using HSAs are paying attention during open enrollment. They are doing their research and finding the plan that gives them lower costs and more control.

Are employees skipping healthcare because of cost?

We know that when budgets get tight, healthcare costs can take a backseat to everyday expenses. 36% of adults say they skipped or postponed needed healthcare in the last year because of cost.⁶. Our research¹ found that HSA holders are much less likely to skip:

Preventive care.
Mental health services.
Planned surgeries.

They have that safety net, so they use it. But there is a worrying generational divide. 36% of Gen Z and 34% of Millennials would skip preventive care just to save money (even though it is likely covered by their health plan). Even scarier? 46% of Gen Z said they would cut mental health services.

Think about that for a second. Nearly half of your youngest employees might walk away from the mental health support they need because they are worried about the cost. This is a clear opportunity for benefits teams to make a difference.

Do HSAs affect financial preparedness for medical emergencies?

Here is where the rubber meets the road. We asked people about their financial readiness for the next six months.

For routine stuff - prescriptions and check-ups - HSA holders are doing well. They are 12.5% more likely to be prepared for those costs compared to those without an HSA account.¹

We also asked about unexpected emergencies, like an expensive ER visit or hospital stay.

HSA holders are 16% more likely to have more than $5,000 saved compared to those without an HSA.

Think about what this means for the majority of your employees. While HSA holders are more prepared, most people would be in a tough position when facing a large medical bill. A short hospital stay, a new cancer diagnosis, or a car accident could derail their financial wellness for years.

The role of employers in healthcare financial readiness

At HealthEquity, we know employers must move beyond just getting people to sign up for an HSA. We need to help them fund it, spend it, and invest it for future financial readiness.

So, what can you do?

Look at your contribution strategy. Are you seeding the account? Is there money available at the beginning of the year? Does the total of your contributions plus theirs cover their deductible for the year? A well-designed employer contribution is often the difference between an account with a zero balance and one that provides peace of mind. Pfizer used this seed strategy, with the employer contribution available on the first day of the plan year, to help employees of all income tiers access the resources they need.⁷

Consider Health Payment Accounts (HPAs).² With HPAs, employees get instant access to funds to pay for OOP expenses through an interest-free line of credit. They can help reduce financial barriers and promote seeking care when it is needed. Learn how R.R. Donnelley improved employee access to healthcare with an HPA program.

Educate on the emergency fund aspect. Employees should know that HSAs are not just for big bills or emergencies. Our Open Enrollment resources can help them understand all the many ways HSAs can help them with healthcare expenses.

Employees count on their benefits leaders for help navigating their healthcare. You have the tools to help them build a buffer that turns a medical crisis into a manageable inconvenience. Let us make sure they are ready for whatever life throws at them.