As limits are being imposed on flexible spending accounts starting in 2013, more employers are turning to health savings accounts. Many employers see HSAs as an option to enhance awareness and consumerism of health care costs, but it takes some effort to help employees fully realize how HSAs work.
Traditionally, HSAs have been seen as a type of plan that is best for people with few health issues, but that is not necessarily true, says Paul Ashley, adviser for FirstPerson, an employee benefits firm in Indianapolis. In Ashley’s experience, HSAs can benefit all types of people – no matter their health care costs – if they are willing to take an active role in their health and consumption.
“Those who tend to do best with an HSA-style plan are those who understand they have power as a consumer, and they can seek information and be a good consumer of their health care,” Ashley says. “People who want to take an active role in their health and their consumption of health costs will benefit from an HSA, so I disagree with the old philosophy. I think the real question is are you someone who wants to take control of their health and be a true consumer in how you use your dollars?”
For many employees, understanding what is covered by HSAs can be tricky, and employers should help employees realize these limitations, says Scott Sims, legal consultant for Aon Hewitt, a human capital consulting firm in Chicago. An HSA can be used to purchase any good; however, if the purchase ends up being for an item that is not a qualified medical expense, the health care reform law mandates that the buyer is assessed a 20 percent penalty fee, which can be surprising when it comes time to file taxes.
“Other types of accounts like a health FSA or health reimbursement account require all expenses to be substantiated, so you can only use your health FSA or HRA for qualified medical expenses,” Sims says. “In some cases, if a plan has a debit card, the debit card won’t even work if it’s not being used on eligible expense. With the HSA, there’s really no limit, so when people use HSAs to buy just anything, they find out that it comes with the price.”
While continuing education is important for all benefits programs, it is especially necessary for HSAs, Sims says. One of the biggest mistakes employees make with HSAs is not putting away enough money. When a big claim occurs, there are not enough funds to cover the expense, and it’s the employer’s job to help its employees understand how to get the most out of their HSA plans.
Sims finds tools, such as online cost estimators, can help employees get an idea of how much they should save. Employers can also consider holding benefits fairs throughout the year or offering programs that forecast potential tax savings, which can encourage employees to contribute to their HSAs.
“Getting employees engaged in an HSA plan is the single most important factor in getting them to contribute,” Sims says. “You really need a comprehensive program between communications and employee engagement. Not one thing in a vacuum will probably work. You’ll have to do a lot of those things to get people involved and engaged.”