A recent article published by the Society for Human Resource Management (SHRM) points out that most employees do not understand the difference between flexible spending accounts (FSAs) and health savings accounts (HSAs). The SHRM article cites a recent survey by Fidelity Investments that found “two-thirds (65 percent) of Americans who make household health-benefit decisions simply do not understand how an HSA works.” A full 73 percent of respondents said an HSA is pretty much the same thing as a health FSA or were unsure and the “use it or lose it” provision of FSAs was one of the most commonly misunderstood differences between the account types. Unlike an FSA, HSA balances carry over from year to year, allowing account holders to accumulate their savings for qualified health care needs. Yet, 69 percent of respondents incorrectly believed they would lose unspent money in an HSA at the end of the year.”
As more employers are moving to high deductible plans with HSAs, it’s important to educate employees about how an HSA works and the triple tax advantages they provide. At the same time, employees who stay in lower deductible plans, should understand how they can use an FSA to their advantage.
What can you do?
- Be clear about which plans can be used with an FSA and which are connected to an HSA.
- Explain both types of accounts in clear, concise terms, using everyday language.
- Provide examples of how the high deductible plan with HSA compares in total out-of-pocket costs to other plans. Include the cost of coverage in your examples and feature scenarios for light, medium and heavy users of health care services. These “people like me” scenarios can help employees to determine which plan might be right for them.
- Offer online or onsite meetings to explain both accounts and answer questions on the spot.
- After annual enrollment, provide plenty of easy-to-pull information and tools on your benefits website for employees to use. For example, we recently produced a three-part animated video explaining a high deductible plan, the HSA and how the two work together when an employee goes to the doctor and gets a prescription filled.
- Point employees to online information from your FSA and HSA administrator as well as general information, such as this video on the USA Today site.
As we move employees to take more responsibility for their health care decisions, it’s important that we provide the tools and education they need to make smart decisions.