Access to health savings accounts (HSAs) has steadily increased over the last decade. According to an employee benefits survey published by the Society for Human Resource Management (SHRM), 56 percent of employers offered their employees an HSA, up from 45 percent in 2014.
Health savings accounts are tax-exempt savings accounts that can be used to pay for current or future healthcare expenses. Employers who have a high deductible health plan (HDHP) often have a tax-advantaged HSA savings account attached. An HSA allows an employer and enrolled members the option to contribute pre-tax dollars that can be used to pay for eligible medical bills.
One of the biggest decisions that an employer must make in regard to HSAs is what vendor to use. Employers generally have the choice between an HSA partner provided by the insurance company or an independent vendor. When making the decision, consider the pros and cons of each option and what is best suited for the organization.
Setting Up An HSA For Employers
Health savings accounts can be an attractive benefit for job candidates and current employees. An HSA can lower healthcare costs and can be used toward copayments, deductibles, coinsurance premiums and other out-of-pocket healthcare costs. When used in conjunction with an HDHP, employees can enjoy comprehensive medical care coverage, portability and in many cases, a generous employer match.
Setting up an HSA is relatively simple — many employers turn to their current health insurance provider for options of HSAs. This can be convenient as the business’s health insurance provider will likely have a preferred financial institution that the business can use to establish its HSA. However, if the options are not suitable, an organization can choose to reach out to other financial institutions or FDIC-insured HSA providers.
HSA providers offer a wide variety of plans to businesses. Spend ample time researching each plan option and compare the contribution minimums and maximums. When searching for banking partners for the HSA, consider differences in fees, investment options and how the funds are dispersed. These details can have a major impact on cost and convenience for employees.
HSA Partner vs. Independent Vendor
Establishing a health savings account can be a powerful way for employees to gain greater control of their healthcare expenses. However, the HSA vendor chosen by the employer makes a significant difference in how well the account is enjoyed by employers and works alike.
HSA vendors frequently use outside banks or third-party custodians to administer a business’s HSA funds. Although this is not necessarily a negative aspect on its own, HSA vendors who use outside banks to administer funds commonly change their banking relationships every few years. These ongoing changes can cause frustration for administrative staff, as well as for the employer and members enrolled.
There are also other factors to consider that could impact benefit satisfaction and the ability to effectively use the account to its full advantage. When an HSA vendor forms a new banking relationship, employees may need to be issued new HSA debit cards. They may also need to learn a new HSA portal which can be time-consuming and frustrating for some workers. Funds may even be transferred following the change of hands, leading to possible confusion for employees.
Businesses that want to avoid these downsides may choose an independent vendor. Many independent banks offer HSA bank accounts for anyone that is enrolled in a qualified HSA medical plan. Choosing outside solutions often offers enhanced solutions that may better aid members in becoming better managers of their personal funds. These solutions that de-couple HSA accounts from the actual health plans have become a driving trend among modern businesses.
Today, there are many tools that can aid employers and employees in finding the right health plans based on cost and other factors. Some firms, such as Amino, offer a cost comparison tool and care finder feature in their app. The free tool accurately calculates costs using claims data, human statisticians and algorithms. Others, such as Lively, can present members with a flexible arrangement paired with an enhanced user interface.
Of course, there are some downsides for businesses that choose to decouple their HSA from their health plan. There is less integration when the two components are separated which can sometimes cause problems for businesses. However, the benefits of this solution often outweigh the costs and inconvenience that employers may face when insurers force ever-changing banking relationships. Employers and members who are committed to certain HSA plan designs should consider partnering with an independent vendor to lessen the administrative burden and disruptions to the business.
Choosing An HSA Provider
Selecting an HSA provider can be a challenging process that requires careful thought and a comparison of costs and features. HSAs are often accompanied by a variety of fees that an employer or employee may be responsible for paying, such as monthly account fees, transfer fees, investment fees, stop payment fees, swipe fees and excess contribution fees.
Many of the same investment considerations in a retirement plan also exist in an HSA. Although some providers do not permit investment of HSA funds, others allow these investments which can be an attractive feature for some members. Integration is also an important consideration when choosing an HSA provider. Having some level of integration can improve efficiencies for employers and employees.
Another important consideration when selecting an HSA provider is the minimum balance requirements. Some providers only allow investing after a minimum threshold has been reached by an employee. It is important for workers to be aware of this account threshold before becoming a member.
Reach Out To An Experienced Benefits Consultant
High deductible health plans and health savings accounts go hand-in-hand, enabling employers and employers to stash away pretax dollars to pay for current and future medical expenses. Unfortunately, choosing an HSA vendor can often be challenging. For more information on how to choose an HSA vendor or to speak with an expert benefits consultant, reach out to our knowledgeable professionals at Business Benefits Group today.