HealthSavingsAccount-HSA.com
a comprehensive resource of information on health savings accounts
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What do you think of HSAs? Send your comments & questions
This Web site is sponsored by: short term and low cost health insurance including HSA-qualified plans
access to PHCS network discount prices to supplement your HSA
allowable supplemental insurance for HSA plans
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Health Reimbursement Arrangements Preferred over HSAs by Tony Novak, MBA, MT, OnlineAdviser at FreedomBenefits.org
Employers are now updating their health plans for 2005 to add consumer-driven features designed to lower costs and improve employee satisfaction. The two most common ways to do this are by adding an optional Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA). An older less attractive option is a Flexible Spending Account. Benefits advisers expect that the older type plans will evolve toward the new more flexible and more popular designs. Of the three methods, Health Savings Accounts have received far more media attention and therefore are the first option requested. However, most employers have found that this will not be available in time for 2005 plans that must be formalized this month, according to a principal with PricewaterhouseCoopers HR services practice. Health Savings Accounts have been slow to catch on since their legal debut in January 2004. Legal technicalities are the primary reasons for the delay in implementing these new benefits. This topic is discussed in detail in other recent benefits publications, including some articles by this author posted at www.healthsavingsaccount-hsa.com . In short, the required underlying insurance is not readily available and it is still too expensive in comparison with other more readily available cost-saving health plans. A top executive of Hewitt Associates, one of the nation’s largest employee benefits consulting firms, said that, as a practical matter, Health Savings Accounts will not be available in employer plans until 2006. The Wall Street Journal reports that many employers are finding more success with Health Reimbursement Arrangements (HRA) plans. According to the Journal’s report, many employers who initially ask for a Health Savings Account find that they really happier with the Health Reimbursement Arrangement because “they can get something similar but better” according to the chief actuarial officer of a quoted source. Both HRAs and HSAs allow employees to pay for a wide range health-related expenses under their own control with pre-tax money. Both plans reward employees by allowing unused funds to accumulate into future years. One key difference is that HSAs require a very specific type of health insurance that is not available (or not attractive) to many employers. HRAs, in contrast, do not require any insurance or may be combined with any kind of health insurance. Another difference is that Health Savings Accounts must be administered by an independent outside trustee, similar to 401(k) plans. Health Reimbursement Arrangements may be self-administered by the employer. Freedom Benefits Association (www.FreedomBenefits.org) provides set-up and support services for both HSAs and HRAs but warns that neither plan is a panacea for health care inflation. The issue of adding consumer-driven benefits should be considered in addition to and separately from the effort to control the escalating cost of benefits. “Any small business providing health benefits to employees should spend at least as much money and attention on cost control measures as in adding consumer-driven features. Otherwise, the cost of even the most basic catastrophic health insurance will increase at least or more than traditional health plans. The price for either an HSA or HRA in a typical small business is usually the same. Freedom Benefits charges $150 per year total for companies with less than 25 employees. Of course, health insurance that may accompany either of these plans is far more expensive, so that should be a larger concern to most employers. |
