Author Topic: Why would an employer offer an FSA instead of an HDHP/HSA?  (Read 5431 times)

smalllife

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Why would an employer offer an FSA instead of an HDHP/HSA?
« on: November 04, 2015, 07:11:12 AM »
For the second year in a row, my company is offering an FSA but no high deductible plan (and therefore no HSA for me).  I've been told there are "numerous reasons" but I can't think of any of meaning.   FSAs put the regulation burden on the employer, are generally more costly, and unless you have kids in daycare/prescription meds a complete crapshoot for the employee.  HDHPs are generally cheaper, HSA regulatory burden on the employee, and it's not use it or lose it.

The only "reasons" I can come up with are: the ones making the decisions are sole breadwinners with multiple offspring (and wouldn't use an  HDHP if there was one), our HR person doesn't have a brain (highly likely, no evidence of it yet), or we have a crappy broker who is pitching a crappy HDHP (possible, although when I asked him directly he said they turned down the HDHP last year even though he tired and really likes his HSA).

Any idea what gives? 

edit: they offer more than one plan, so it's not a "choose what fits most" scenario
« Last Edit: November 04, 2015, 02:24:41 PM by smalllife »

Schaefer Light

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #1 on: November 04, 2015, 07:23:52 AM »
I'm in the same boat.  Really wish I had access to an HSA.

Tyler

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #2 on: November 04, 2015, 10:58:02 AM »
Well, it's possible that the company is simply choosing the policy they believe works best for the majority of the employees.  They can't legally disclose the health conditions of others, but they can certainly account for known ones when evaluating insurance options. 

But I agree that it's nice to have an HSA option for the employee.  I've never cared for FSAs. 

Trudie

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #3 on: November 04, 2015, 11:03:40 AM »
My employer recently went from offering an FSA/PPO to an HSA/HDHP.  I can tell you that the reason we stuck to the FSA/PPO scheme in the past is that we had "grandfathered" status and didn't need to comply with certain ACA requirements.  Also, since you can't offer an HSA without an HDHP that precluded that option.

Switch to 2016 -- rates are up another 10% and our employer cannot exercise the option to increase employee contribution rates to have more shared responsibility under the existing grandfathered plan, so we switched to the HSA/HDHP.  The employer is making a very nice HSA contribution.

Obviously, the former course was expensive and the employer was bearing most of the cost increases.  But it was an important benefit, and there was a desire to try to offer really nice benefits.

As the payroll accountant I've looked at this backwards and forwards... announcement of the change hasn't been popular with employees.  It's a big change.

reader2580

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #4 on: November 04, 2015, 11:37:48 AM »
My employer currently offers both options.  Our plan is still grandfathered.  Our plans are now in year three of no cost increases for healthcare.  For employees who tend to have high health care costs an FSA plan is typically less expensive overall.  For a single person at my employer the deductible for FSA is $250 and the plan plays 80% of care costs.  For a single person the deductible for HSA is $2600 a year with an $800 company HSA contribution with the plan paying 90% of care costs.  The HSA plan costs $20 a month less for singles.

The HSA at my employer makes no sense if you have any chronic conditions that require any sort of regular care.  Four or five office visits will cost more than the $800 HSA contribution.  I have co-workers who don't regularly use any medical care who are accumulating money in their HSA that could cover the deductible should they have a need for a lot of health care down the road.

I'm a red panda

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #5 on: November 04, 2015, 11:46:08 AM »
I personally like the low-deductible plan with FSA that my employer offers.  My out of pocket max is lower than my husband's deductible is!  (Of course, because he has an HDHP with HSA, I can't have an FSA, so I don't get that benefit of my plan.)

There is a cost to administering plans, so they can't offer every single option. Benefits officials have to make a call for what is best for both the company and the employees. They can't please every individual.

merula

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #6 on: November 04, 2015, 11:47:38 AM »
FSA money is "use it or lose it", unlike HSA. My understanding was that anything "lost" went to the plan administrator, so it might be a bonus to using one. (Although, in the specific instances I heard of, it didn't come close to making up for the administrative cost.)

unless you have kids in daycare/prescription meds a complete crapshoot for the employee

This is likely a much higher percentage of the employee population than you're thinking. And, strictly speaking, any chronic health condition would fit, not just prescription meds.

Also, offering many options is going to be more costly than just offering one. You won't get the strength in numbers with any one plan that would help lower costs, and it's going to be more work to administer. HDHPs are great for some people, maybe even most, but those with chronic health conditions are likely going to find a traditional health plan cheaper overall, and there are people who have had traditional plans for decades and are resistant to change.

I would bet that someone at your company has done a cost comparison on offering multiple plans, offering just traditional, and offering just a HDHP with some HSA contribution that would make employees whole in terms of total OOP health expenses, and determined that traditional is the cheapest.

catccc

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #7 on: November 04, 2015, 12:57:03 PM »
I personally like the low-deductible plan with FSA that my employer offers.  My out of pocket max is lower than my husband's deductible is!  (Of course, because he has an HDHP with HSA, I can't have an FSA, so I don't get that benefit of my plan.)

There is a cost to administering plans, so they can't offer every single option. Benefits officials have to make a call for what is best for both the company and the employees. They can't please every individual.

I feel that a lot of our employees prefer this, as well.  They'd rather hear "It's $20 to see your doctor, $40 to see a specialist." than "coverage kicks in after your $4,000 deductible is met."  The tax advantages of an HSA, or the HSA as a stealth retirement vehicle, aren't appreciated by the masses, I think.

I would like an HSA option here, but since it's not happening, I'm really grateful for what we do get.  This is my 2nd open enrollment here, and the 2nd year of the same exact great coverage with no increase in the employee's cost share.  (Actually, last year it went down $3/month.)  I'm very happy about that.  At my previous employer, I saw increases (anywhere from $10-$28/month) in cost share every year, with increasing co-pays most years.  Really stellar employer.

smalllife

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #8 on: November 04, 2015, 02:20:40 PM »
Also, offering many options is going to be more costly than just offering one. You won't get the strength in numbers with any one plan that would help lower costs, and it's going to be more work to administer. HDHPs are great for some people, maybe even most, but those with chronic health conditions are likely going to find a traditional health plan cheaper overall, and there are people who have had traditional plans for decades and are resistant to change.

I would bet that someone at your company has done a cost comparison on offering multiple plans, offering just traditional, and offering just a HDHP with some HSA contribution that would make employees whole in terms of total OOP health expenses, and determined that traditional is the cheapest.

See, that's what I don't understand.  They offer three plans - all low deductible, with an optional FSA.  If they offered just the one I would understand, but it's basically three traditional options. 

We're small so I know a traditional option isn't going away because of certain individuals and their health, but to offer three plans and not have one that works for healthy folk without kids (about a third of the office) just seems strange.   If you're already doing multiple plans, why not have one option that's cheap for you and for the employee?  I can buy a plan on the exchange and have money left over to contribute to an HSA with what they are paying.  And yes, I've asked for the equivalent in cash and was told no.

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MoonShadow

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #9 on: November 04, 2015, 02:40:22 PM »

The HSA at my employer makes no sense if you have any chronic conditions that require any sort of regular care.  Four or five office visits will cost more than the $800 HSA contribution.

Then you are probably looking at something wrong.  I have 5 kids, one of which has a chronic condition he got from his mother.  And then there is his mother's condition.  And I have a chronic condition.  All three of us take meds daily, and will for the remainder of our lives.  My company pays nothing towards my HSA, and as far as I can tell, only pays for the monthly account fees at the HSA bank.  And I pay the premiums, and the limited-FSA, out of pocket as well.  All this and I can prove that the worst case is within 2% of the costs of the standard family plan in any year of my adult life, if I had been using an HSA that entire time.

mm1970

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #10 on: November 04, 2015, 04:50:54 PM »

The HSA at my employer makes no sense if you have any chronic conditions that require any sort of regular care.  Four or five office visits will cost more than the $800 HSA contribution.

Then you are probably looking at something wrong.  I have 5 kids, one of which has a chronic condition he got from his mother.  And then there is his mother's condition.  And I have a chronic condition.  All three of us take meds daily, and will for the remainder of our lives.  My company pays nothing towards my HSA, and as far as I can tell, only pays for the monthly account fees at the HSA bank.  And I pay the premiums, and the limited-FSA, out of pocket as well.  All this and I can prove that the worst case is within 2% of the costs of the standard family plan in any year of my adult life, if I had been using an HSA that entire time.
I think it really depends on the plan.  For our company plan, the max out of pocket is $4000 (family) for an HMO and $7000 for HSA.  HMO premiums are $1440 a year.

I did the math on a family of 4, including pregnancy, major surgery for the little one ($20k), the HMO was a no-brainer.

MoonShadow

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Re: Why would an employer offer an FSA instead of an HDHP/HSA?
« Reply #11 on: November 04, 2015, 06:00:22 PM »

The HSA at my employer makes no sense if you have any chronic conditions that require any sort of regular care.  Four or five office visits will cost more than the $800 HSA contribution.

Then you are probably looking at something wrong.  I have 5 kids, one of which has a chronic condition he got from his mother.  And then there is his mother's condition.  And I have a chronic condition.  All three of us take meds daily, and will for the remainder of our lives.  My company pays nothing towards my HSA, and as far as I can tell, only pays for the monthly account fees at the HSA bank.  And I pay the premiums, and the limited-FSA, out of pocket as well.  All this and I can prove that the worst case is within 2% of the costs of the standard family plan in any year of my adult life, if I had been using an HSA that entire time.
I think it really depends on the plan.  For our company plan, the max out of pocket is $4000 (family) for an HMO and $7000 for HSA.  HMO premiums are $1440 a year.

I did the math on a family of 4, including pregnancy, major surgery for the little one ($20k), the HMO was a no-brainer.

Seriously?!  A max out of pocket of $4K is pretty much unheard of anymore.  Are you sure?