Over the years, we have seen that many employers have similar challenges in understanding health savings account funding, plan design and contribution strategies. As HSA use continues to grow, there are no shortage of questions that will need answers. Brokers and agents are often tasked with tackling those questions, which is why we would like to focus on helping to answer those questions we hear most over the next few months — starting today with plan design.
Q: What’s the most effective way to design a high-deductible health plan with an HSA?
A: A well-designed plan is one that drives higher enrollment — resulting in higher savings for the employer. This is done all while improving employee health and well-being by helping employees become smarter, more deeply engaged health care consumers. In brief, provide the best experience for employees possible by removing any barriers to enrollment and by helping employees get the most from their HSA plan.
In order to do that, we have five top recommendations for employers:
1. Allow pre-tax employee contributions. Employees get the current tax savings on their HSA contributions, as opposed to waiting for tax returns, while also enjoying the convenience of payroll deductions to contribute to their accounts. Simultaneously, employers save on payroll taxes and expenses due to paying them on a lower gross income.
Note: This requires the HSA to be structured within a Section 125 Cafeteria Plan
2. Make contributions to employee accounts. An employers’ contribution to employees’ accounts is the single most effective way to get employees to save. The amount should be significant enough to grab attention and interest. Contributions can be designed as lump sum, periodic or a variety of other structures. Regardless of the structure, we recommend contributing earlier in the year to help alleviate a common fear associated with enrolling in a high-deductible plan, which is the potential burden of an unexpected health care expense with no funds available to cover it.
3. Price the high-deductible plan attractively during enrollment. Recognizing that there are many factors and variables that impact employee premiums, in general, we recommend that the plan be priced very competitively — if not the lowest monthly premium option. We say this because for those employees who carefully budget, a low premium is a known expense, weighed down by the unknown risk of their expenses or fear of the higher deductible. If not for a lower premium, what is motivating them to choose a high-deductible health plan with an HSA?
4. Make your wellness program part of the HSA-compatible plan. This is a natural pairing as both require an engaged employee making meaningful decisions in their health care and health habits. Employers face a great challenge in motivating employees to make behavior changes. Building a wellness program with incentives that reward desired behaviors and actions can have a tremendous impact on employees’ health and ultimately the bottom line.
5. Pay accountholder fees for employees. Our final recommendation is to pay accountholder fees for employees. This may seem like a small thing considering the average monthly fee for an accountholder is only a few dollars, but paying these fees makes a significant difference in employees’ perception of the value of the plan because they aren’t feeling “nickel and dimed.”
Keep these five items in mind as you looking at implementing or improving your HSA offering. In addition, we have available on our website, a free complete HSA FAQ resource library that provides in-depth answers to a wide variety of HSA questions.
Stay tuned for our next column as we continue to tackle Top HSA Questions.