What are key things employers need to understand about HSAs?
Employers are nervous that employees will stop receiving care because services are paid for out of pocket with high-deductible plans. But when employees are paying, they’re more likely to get appropriate care. Studies also show that people with chronic conditions who hold HSAs take better care of themselves.
Employers also worry that these plans won’t change the trend of health care spending, but the reverse actually happens, as premiums continue to be about 30 percent for HDHPs. The premium increase is also smaller each year than it typically is with other plans, so many employers contribute part of the savings into employee HSAs.
Many employers hesitate to offer HSAs because they cannot get that money back. If an employer puts money in an employee’s HSA on Jan. 1 and the employee terminates on Jan. 2, the employer cannot recoup the funds.
One solution is to spread contributions over the year, but what if that employee has a big ER visit on Jan. 2? A recent change in the Federal Registry allows employers to prorate contributions over the year but advance money to help employees with a medical emergency. Employers should create a policy that specifies this option is available and outlines how employees can access that contribution sooner and then apply it uniformly across all employees.
Employers can allow employees to put pre-tax contributions into the HSA bank account through a payroll deduction process. The employer must sponsor a Section 125 plan (also known as a Cafeteria Plan) and reference the option for employees to contribute money tax free. Employees then simply make a contribution election, which can be changed at any time.
What do employees need to understand about HSAs?
Employees need to compare health insurance plan designs if they have more than one option. For example, if an HDHP is offered as a benefit design along with another design, calculate which option is best for your family. Determine your premium costs under all options, then look at your expected health care needs and factor in the out-of-pocket costs associated to those services (deductibles and copayments), and how much your employer is contributing. And if the HDHP with an HSA makes the most sense for you, discipline yourself to contribute to the HSA every pay period.
While you have to be careful how you use your account because of audits, at the end of the day, it’s your money, and you can spend it how you want for medical expenses.
Marti Lolli is a product manager with Priority Health. Reach her at (616) 464-8233 or [email protected].