Companies can help employees keep more money in their Health Savings Accounts to spend on future qualified expenses by adopting one or more of these approaches.

Health Savings Accounts are designed to help us manage current and future qualified expenses by delivering tax benefits on every dollar contributed to and invested in our accounts. The more we retain in those accounts, the more money we have available to pay future medical bills. Thus, a reasonable goal is to maximize our account balances.

At the same time, medical coverage is designed to protect us when we experience an injury, illness, or condition that requires immediate or ongoing care. We don't want to compromise our health by not seeking care just to see our Health Savings Account balance grow.

Is there a happy medium? Yes. Employers can offer some services and products that help employees reduce their net cost of care, thus preserving higher Health Savings Account balances without reducing care (and, in some cases, enhancing outcomes). And they may also reduce the cost of coverage (future premiums). Let's look at these services and products to see how they help.

Employee Education

Educating employees to become better consumers of medical care has the dual benefit of helping Health Savings Account owners retain more funds and potentially reduce future premiums. That's because premiums for group medical coverage are based in whole or in part on claims experience when the company has 51 or more employees. Thus, two companies, each with 250 workers, will pay different premiums for the same plan if one company's enrolled workers average $10,000 annually in claims and the other's only $5,000.

How can employers (often with their insurer) drive down claims costs? Here are some topics to discuss with their covered workers:

·         The benefits of better nutrition and physical activity to promote health.

·         When and where to receive care (self-care, nurse hotline, virtual visit, retail clinic, urgent-care facility, emergency department).

·         How to choose a provider or service based on cost and quality (using an insurer's or third party's pricing tools or reading a prior Explanation of Benefits or a provider's price menu).

·         How to shop for prescriptions (discussing dosing options with a prescribing physician, leveraging drug-discount programs).

·         How and where to seek a second opinion.

The greatest savings come from services not utilized (with no adverse medical outcome). Other savings come from applying to medical care the same consumer skills that we use when we purchase a vehicle, a vacation, electronics, and groceries. The goal of education is to give workers the tools to reduce their overall cost of care, thereby preserving account balances.

Employee Incentives

Some companies, particularly those who offer innovative designs on self-insured plans, extend special tools and requirements to employees. Workers may be required to seek a second opinion at a national center of excellence for a particular injury or condition, shop for an MRI locally based on price, or explore receiving care outside the geographic area at a facility specializing in a procedure or treatment. Employers reward workers who save money through these tools with money, which workers can contribute to their Health Savings Accounts or spend on other items.

These efforts take over where employee education ends by providing meaningful financial incentives that can reduce the price of care (or change proposed courses of treatment to less-expensive and -invasive options) and provide additional funds to contribute to a Health Savings Account. They’re a great way to optimize care.

Limited-Purpose Health FSA

Health Savings Account owners who expect to incur dental and vision services can reimburse those expenses tax-free from their Health Savings Account. But employers can also sponsor a Limited-Purpose Health FSA, which reimburses these claims (and sometimes qualified medical expenses, too, after the employee has satisfied the statutory minimum annual deductible for her contract type). An election to a Limited-Purpose Health FSA further reduces taxable income and allows employees to enjoy the tax benefits of a Health Savings Account while preserving their account balances.

A Limited-Purpose Health FSA provides a third option to what may otherwise be a dilemma between not paying for these services with tax-free funds or reducing a Health Savings Account balance to reimburse tax-free future qualified expenses.

Post-Deductible HRA

Employers who want to offer a plan with, say, a $2,500 self-only deductible may find that they can save money by purchasing a plan with a $5.000 deductible and reimbursing the back half with a Health Reimbursement Arrangements. HRAs integrated with medical plans can disqualify employees from opening and funding a Health Savings Account if the HRA isn't designed properly. When the HRA doesn't begin to pay benefits below the statutory minimum annual deductible for an HSA-qualified plan ($1,600 for self-only and $3,200 for family coverage in 2024, increasing to $1,650 and $3,300 in 2025), the plan is compliant and covered employees can fund their Health Savings Accounts to their limit.

Employers can use a Post-Deductible HRA when they spot an anomaly in carrier pricing. Insurers set premiums based on their expected claims payout and cost of administration. Sometimes, whether by accident or design, insurers price a plan more (or less) attractively relative to another. When that happens, employers can take advantage of that discrepancy and keep employees whole by integrating a Post-Deductible HRA that restores the original deductible.

Another benefit to employers: They can adjust the net deductible upward in smaller increments than insurers offer. In the example above, rather than moving from a net $2,500 to, say, a $3,000 deductible, an employer can gradually increase the net deductible by, say, $100 to $200 annually by adjusting the set-point at which the HRA begins to reimburse claims. This flexibility smooths out the otherwise sudden jumps of $500 or more in deductible responsibility.

Voluntary Coverage

As employees confront higher deductibles, more employers are offering voluntary hospitalization, critical-illness, or accident coverage (or new plans that combine two or more of these types of encounters into a single policy). These plans pay a pre-determined dollar amount when a covered family member is admitted to the hospital, is diagnosed with diabetes, cancer, or another covered condition, or experiences an emergency-department visit, a broken bone, or a concussion. Historically, these

Voluntary plans aren't disqualifying because they don't reimburse claims. Rather, they pay a fixed amount that the insured person can apply to medical bills or other expenses, as prominent spokesmen Nick Saban, Bill Belichick, Mike Krzyzewski, and Deion Sanders inform us. They're not for everyone. But if you anticipate an inpatient stay next year, or your active kids end up (appropriately - see above) in the emergency department several times annually, a voluntary plan with a $360 annual premium that pays you $750 for an inpatient admission or $400 for each ED visit allows you to pay your bills while retaining more of your Health Savings Account balance to grow through investments to pay future qualified expenses tax-free.

The Bottom Line

The purpose of medical coverage is to protect employees and their families against an unexpected catastrophic loss or to manage their cost of treatment for a chronic condition. Reducing the incidence of those medical situations, providing meaningful tools and incentives to employees to choose the right level and location of care, and offering other plans to help offset necessary expenses are all effective approaches to helping employees retain balances in their Health Savings Accounts. These approaches often offer the added benefit of better outcomes and lower claims costs, which benefit employers and their workers' families alike.

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HSA Wednesday Wisdom is published every other week, alternating with HSA Question of the Week. The content of this column is informational only. It is not intended, nor should the reader construe the content, as legal advice. Please consult your personal legal, tax, or financial counsel for information about how this information applies to you or your entity.