Health Savings Accounts – How Best to Choose

An employer should not automatically assume that an HSA platform has operational efficiency because it claims to be “integrated”. The employer should delve deeper into the details of the arrangement to find out just what they mean by “integrated” and how that integration works. The HSA is an individually owned bank account and is therefore not an integral part of the insurance coverage/policy itself. This account is unique in that it contains investment options not typically contained within a bank savings account; in this regard, it is more like a 401(k) than part of a group health plan. Therefore, selecting your HSA platform for your group should be a completely separate choice, entirely apart from selecting your the High Deductible Health Plan (HDHP) carrier or investment option available to employees through another entity.

Looking for “Best of Breed” and Breaking Down the HSA Stakeholders

Best practices suggest that when looking for a HSA platform for your employee group, you take into account if what you are looking at is a “Best of Breed” solution. This means you should look for a platform that does multiple things well rather than being focused on one single facet or link in the chain. Break the HSA down into its components, the HDHP, the Bank/Custodian, investment options, and look for comprehensive customer service. Look at the HSA in its entirety; the HSA is not the sum of its parts but how they have been brought together in one platform.

Some HSAs are presented as part of a package that appears inherently linked to a bank and carrier in an inflexible way. Carriers may pre-package and present a CDH solution with its default components in order to simplify implementation, however these components should be able to be switched out. The best HDHP carrier might not be affiliated with the best bank. The best bank might not have the best HSA solution. The HSA is an independent account, and therefore should be modular: a good HSA platform can fit in with any plan, any custodian, and any carrier.

Due to the nature of HSAs, they have multiple functions that are distinct and descript which must be brought together in a cohesive fashion to best serve the Employer and Employee. There are several stakeholders that are a part of the HSA who are integral in making a HSA a valuable tool to the Employee. No platform should try to take shortcuts; solutions must be built around all of these roles.

• The PSP – The PSP’s role in the HSA is two-fold. They act in the traditional role of Plan Service Provider to the group and to the plan for the Employer and Human Resource. In the case of HSAs, however, the PSP acts as a Personal Service Professional to account holder. An Employee must have a means of easily communicating with their PSP for account service and support. The Account requires the personal attention and support of a single unbiased professional. An Employee should be able to inquire about benefits, account status, and claims as well as have access to the personal services of an HSA professional who understands the banking rules as well as the benefit rules.
• The Custodian – The Custodian is the bank in which the individual’s HSA money is held. Different custodians may offer different options in the way of investments, how interest payments are structured, or fees pertaining to account services. Every bank will have differences in their fine print and fee structures and some banks may even pass data back and forth between to a broker account.
• The Carrier – The Carrier is the entity which is providing the coverage as part of a High Deductible Health Plan. For individuals with a HSA, transactions with the HSA used to pay for medical services will be applied toward the deductible.
• The Plan – The Plan in many ways shapes how the HSA will be used and contributed to. For an individual to have and use a HSA, the Plan must have a High Deductible and be a HSA qualified plan. The monetary limits to deductibles determine the status of the Plan, and the government’s limits on contributions and deductibles that determine if a Plan is HSA qualified change each year.
• The Employer – As the Employer, you make the HSA an available option to your employees by offering a High Deductible group Plan. By allowing the employee to contribute to an HSA pre-tax out of Payroll and putting matching contributions in as well, both the you and your employees can substantially benefit from tax savings.
• The Individual – The Individual owns the account, puts money into the account, and, if the bank and platform allow, may choose to invest the money from the account. The Individual should be able to reap the benefits of an HSA through its tax shelter, investment options, and ability to function as an alternative retirement fund and also have access to the tools and professional service that will allow them to get the most from the account.
• The Platform – The Platform is what connects these various stakeholders. It links the PSP, the bank, the carrier, the plan, and the individual all to the Account. How the platform links these stakeholders is important. HSAs are the individual’s responsibility, but there needs to be connections to facilitate the conversation between the CDH facets. Because of this, the system needs to involve the PSP on all sides of the transaction; this is the foundation upon which the HSA platform must be built.

A HSA platform needs integration, but it needs to be able to uncouple itself with the carrier without also breaking the other connections. It should also be able to move investments in and out easily. The HSA platform must have solidity in motion. It must be able to have a strong link between the bank, carrier, and provider to ensure that there is an appropriate level of communication and support for the individual account holder. HSAs are portable and individually owned, and therefore must be able to move with an employee from one plan to the next, or even one employer to the next, so the platform must be flexible enough to move one carrier out and another carrier in. The choice of the bank custodian and platform should not be a by-product of your carrier’s high deductible solution. Why? Because a health plan is for a plan year, a HSA is for life.

Things to Ask when Choosing an HSA Platform

There are several questions you should ask before deciding upon an HSA solution. A good HSA solution means happy and satisfied employees; happy and satisfied employees are more loyal and productive. A good platform will have a single point of service for the Employer and the Employee and fees will be distinct and easily understood. The custodian platform should be componentized and autonomous; separate, distinct, but also closely coupled to the other facets of CDH for a best practice solution.

How well can the platform handle contributions and management of funds?

The platform needs to be able to manage contribution from both the employee’s pre-tax payroll and employer’s contributions. There needs to be a connectivity of funds, which need to be easily integrated for management alongside a 125 Cafeteria plan. Unless employees are able to set aside money pre-tax from their paychecks, both they and their employers will not be able to reap the full tax saving benefits of having an HSA. Like a 401(k) the HSA is a retirement option, in that funds can be set aside, invested, and collected upon retirement age without tax penalty for non-medical use. The employee should also have ready access to personal advisors to help them manage their account and investments.

Can you change carriers without needing to change custodians?

This is something that is absolutely critical to look for in your choice of HSA platform. From year to year, you will likely offer different High Deductible Plans and maybe even switch carriers. Additionally, in the event that an Employee leaves your company, the Employee’s HSA must be portable enough to go with them into a new company with a new plan.

How does the platform handle receipts?

Employees need the PSP to help with their receipt management, because receipts outlive plan years. An HSA platform should allow Employees to store receipts for HSA transactions in a secure online digital vault and include completion of an 8889 for tax purposes. The technology exists to support this, and there is no reason to settle for less when you can get this from a superior HSA provider.

Are security and compliance important?

By having a SAS 70 approved solution, you know that the account data is secure, and the processes by which it is handled have undergone rigorous testing against a national standard. Knowing that personal information and account records are safe is important to the peace of mind of account holders.

How many websites are employees going to have to sign up on?

Single sign on portals that can use integration to link the HSA platform to the rest of the employee’s plan and benefit information allows for increased ease-of-use. If your employees are able to sign into to their HSA account and a page with the rest of their benefit information through a single sign on page, they will feel much more comfortable with their HSA.

Does it have a dedicated PSP with a wide range of knowledge and expertise?

The hallmark of a good HSA is a single point of contact with a professional who understands employee benefits, 125 cafeteria plan regulations and other applicable codes, non-discrimination testing, HIPAA, bank privacy rules, investment options, transaction mechanics, and simplified fees.

These services are available and go beyond the minimum requirements of the provided service and often go beyond what the carriers are required to offer. But why should you settle for the minimum? You can find an HSA platform that provides for any plan related needs and then some. If you are considering offering an HSA, choose a platform that offers interoperability, interconnectivity, and interdependability.

Offering a HSA qualified plan is a rapidly growing trend among Employers. Employees demanding the option of putting aside payroll into a privately owned HSA will not be a matter of if, but when. Be sure to look before you leap. You want to find an HSA solution specifically designed to meet the needs of the account holder, the employer, the plan sponsor, the bank custodian, the provider, and the carrier. Those are a lot of needs to accommodate, but it is possible to find a solution to all of these in your HSA platform.