Alegeus Predicts That Consumers and Employers Will Leave Billions in Tax Savings on the Table This Open Enrollment Season Due to Low Consumer Health & Financial Fluency
New research illuminates specific consumer knowledge gaps regarding personal finances, health insurance and health benefit accounts – which must be addressed in open enrollment communications
September 18, 2018 09:00 AM Eastern Daylight Time
WALTHAM, Mass.--(BUSINESS WIRE)--Alegeus, the market leader in consumer-directed healthcare (CDH) solutions, today announced its newest research report that evaluates consumer health and financial fluency. The report was commissioned to better understand consumer confidence and fluency in managing their personal finances and health benefits and to assess the degree in which fluency levels impede consumer progress to proactively manage their healthcare finances.
Tax-advantaged benefit accounts (including FSAs, HSAs, and HRAs) offer great value to consumers, allowing them to save pre-tax dollars for eligible healthcare expenses. However, despite being widely offered by employers, those accounts are often under-utilized and under-funded. According to Aite Group, out-of-pocket healthcare spending in 2018 is predicted to be $371 billion. Yet, that same report indicates that only $86.3 billion of that spending will flow through tax-advantaged benefit accounts. This means, assuming an average tax rate of 30 percent (Federal & State), consumers will leave nearly $85 billion in tax savings unclaimed this year.
Alegeus research findings indicate that low consumer fluency plays a significant role in these missed savings opportunities:
Many consumers are not disciplined about saving in any aspect of their lives, not just for healthcare. More than half (51 percent) of consumers say they have not established a rainy-day fund and aren’t disciplined about saving for retirement.
Consumers lack confidence about financial topics in general. Nearly half (48 percent) of consumers don’t know how to build a financial plan and four out of ten (41 percent) don’t feel confident discussing financial topics.
Consumers don’t understand basic health and financial terminology and concepts. More than two out of five (42 percent) consumers failed a basic true/false fluency test regarding their personal finances and even more (50 percent) failed the health insurance fluency test.
Consumers are still confused about how tax-advantaged accounts work. This is even true for those that are already enrolled in these accounts. A little more than one-third (35 percent) of existing health savings account holders knew enough about their accounts to pass a basic fluency test.
Out-of-pocket costs are still a major point of stress. One out of two (51 percent) consumers can’t forecast their out-of-pocket costs this plan year, and nearly six out of ten (58 percent) don’t know how much they need to save for healthcare costs in retirement.
Consumers don’t know what they don’t know. Even among those that claimed confidence, half still answered simple questions incorrectly.
“As employers shift to more consumer-directed benefit designs, consumers will continue to absorb greater financial responsibility for their healthcare. Tax-advantaged benefit accounts are the foundation for how consumers will get better value for those dollars – providing protection from short-term deductibles and longer-term out-of-pocket costs into retirement,” said Steven Auerbach, Alegeus CEO. “We are on the cusp of another open enrollment season, which presents a great opportunity for employers to help their employees better understand the value of electing and contributing to these accounts. This research provides useful insight to help guide their benefit communication and training strategies.”
Learn more about the Alegeus research:
Download the full research report.
Register to join an upcoming Alegeus webinar, 10/3: Realities of Consumer Health & Financial Fluency – Strategies to Close the Gap.
Alegeus is the market leader in consumer directed healthcare (CDH) solutions, offering the industry’s most comprehensive platform for the administration of healthcare benefit accounts (including FSAs, HSAs, HRAs, wellness incentive, dependent care, and commuter accounts), the industry’s most widely-used benefit debit card, and powerful engagement solutions to help consumers maximize savings and optimize spending for their healthcare. Over 300 clients – including health insurance plans, third party administrators and financial institutions – leverage Alegeus’ deep expertise and proven technology to administer benefit accounts for more than 30 million members and process more than $9.1 billion in consumer healthcare payments annually. As the healthcare and benefit markets continue to evolve, Alegeus delivers solutions that enable clients to evolve their service offerings, operate their businesses more efficiently, and focus on their customers. The company is headquartered in Waltham, MA with operations in Orlando, FL and Milwaukee, WI.
Jennifer Irwin, 414-699-5927