There’s more to building a great staff than just offering competitive salaries, recognizing success and providing career growth opportunities. Time and again, studies show top-of-the-line employee benefits are critical to attracting and retaining key talent. According to the 2015 Society for Human Resource Management report, employee benefits are among the top five contributors today to employee satisfaction, along with respectful treatment of all employees, trust between employees and senior management, job security, and compensation. The report also found that 63 percent of employees in 2014 ranked these benefits ahead of compensation and job security with regards to overall satisfaction in the workplace.
Healthcare-related offerings are frequently near the top of the list when employees are asked what benefits they care about most. And with patients increasingly on the hook for a greater share of their overall healthcare costs, health savings accounts are becoming increasingly popular with employers and employees alike as a way to stretch today’s healthcare dollar. According to a recent study by the Flexible Benefit Service Corporation, HSA adoption rates among large employers have grown by more than a third in the last five years. It’s not difficult to understand why: Along with considerable cost savings for employees, the global consultancy Mercer estimates HSAs save employers $1,700 per employee annually. But is an HSA program realistic for small and mid-market businesses to consider? The following is an overview of these pre-tax healthcare employee savings programs that can help ASC leadership teams make the most informed decisions:
HSAs, explained
An HSA is a tax-advantaged medical savings account that is owned by an individual. The funds contributed to the account are not subject to federal income tax at the time of deposit. HSAs are tied to high-deductible health plans (HDHPs); for an individual, the deductible can range from $1,250 to $6,350. If an individual has low medical expenses and regularly contributes to the HSA, the account can amass significant savings that can be used, tax-free, for healthcare expenses or used for retirement on a tax-deferred basis. An HSA is commonly recommended for healthy, younger individuals who do not foresee any significant medical expenses in the coming year.
High deductible v. PPO
As HSAs enter the marketplace at an increasingly rapid rate, it is important for employers to understand the nuanced differences between this option and the traditional PPO plan when selecting what works best for their facility. One argument for an HSA versus the traditional PPO model is the ability for employees to accurately predict their expenses. Although a PPO plan has the advantage of predictable up-front expenses due to a fixed copayment, this predictability can be lost on those with large expenses who meet their deductible. The copayments within this plan do not count toward the out-of-pocket (OOP) maximum, and continue even after the deductible has been met. This causes some members’ total health expenses to be both uncapped and unpredictable. Within an HSA, however, the higher up-front expenses members pay do count toward the deductible and OOP maximum. The OOP maximum is still within the HSA-qualified plan, allowing the member to plan their spending accordingly. An additional difference between these two options involves flexibility. HSA members are able to pay, on a pretax basis, for qualified medical expenses not covered in standard or HSA insurance plans — expenses that may include dental, orthodontic or vision.
HSA v. FSA
Flexible spending accounts (FSAs) have been around since the 1970s and are set up and owned by employers. Like HSAs, the money contributed to this fund is pre-tax, reducing employees’ overall tax burden. Flexibility is a critical component when comparing HSAs to FSAs. Surprisingly, FSAs offer less flexibility and cost-savings options; while only $500 can be rolled into March of the following year within FSAs, HSAs are not necessarily tied to expenses in a particular plan or calendar year. Rather, all funds are automatically rolled over to the next calendar year for future medical expenses, or may be used to reimburse qualified expenses from prior years (if the expenses were qualified under an HSA plan at the time). Therefore, setting up and managing FSAs requires employees to have a fairly accurate prediction of their medical expenses in any given year. Remember, clear and open communication with employees regarding their coverage plan is key to ensure staff feel comfortable and satisfied with their benefits package. Sending a memo to staff informing them of the details of their plan(s) can help them feel supported in their work environment, aware of their health care options and can lead to greater overall job satisfaction. If you have any questions regarding employee health care plans, please contact dmoody@regentsh.com.
