Health care spending accounts (HCSAs) are gaining popularity in today's benefits marketplace. Employers have previously offered HCSAs as a 'top-up' to a traditional benefits plan; however, in recent years, more have opted to provide a standalone HCSA as a flexible benefits program.
An HCSA is a predetermined amount of money set aside by an employer for employees to use toward eligible health and wellness expenses. HCSAs are typically funded entirely by the employer. Employees access the account when they have an eligible claim, and the funds are replenished each year. Employees can direct their dollars toward the services and supplies they use the most, including paramedical services. This translates into flexibility at no additional cost to the employee.
The main advantage for employers is the fixed capped cost of a standalone HCSA. The maximum amount every employee can spend (plus applicable administration fees) is a known budgetary expense and easy for businesses to account for.
The biggest drawback to a standalone HCSA is that it can limit access to benefits for those employees who may need it most. Implementing a maximum on the overall amount that employees can spend is a shift away from the fundamental reason that many employers offer benefits in the first place—to protect workers and their families.
Removing the actual 'insurance' portion of a benefits plan transfers the potentially devastating impacts of an unexpected life event on employees. Death, disability, critical illness, or high-cost health claims can be costly without proper coverage. Should they choose to purchase their own insurance, employees risk not being able to secure coverage or being charged a higher rate than an employer could obtain through a group plan in cases of a pre-existing condition.
There are benefits and drawbacks to offering a standalone HCSA to your employees. The potential loss of core risk coverage is why HCSAs are commonly implemented as a top-up to more traditional benefits offerings.
How do you find a solution that works for you? Talk to your employees about the benefits they want in their plans. Investigate what your competitors are doing. Consider your budget and what options are available. Consider additional options like cost-sharing models to create a more robust offering. The key is to stay informed. No benefits plan is one-size-fits-all.