Benefits Buzz

Two HSA Features Often Overlooked

Posted on May 3rd, 2017

Health Savings Accounts (HSAs), in combination with a qualified high-deductible health plan (HDHP), are usually touted as a way to lower insurance premiums and pay for out-of-pocket medical expenses with tax-free dollars. 
Over time, some people are fortunate enough to accrue sizeable account balances in their HSA to use for future medical expenses or even as a supplemental retirement benefit. And the really good HSA account holders have become better “consumers” of medical care. They tend to use their HSA dollars more wisely by doing things such as requesting if a cheaper, generic drug can be prescribed instead of a brand name alternative. 
These are the types of things that are mostly advertised when someone is talking about the benefits of an HSA, and these things should be considered when deciding if an HSA makes sense to open. However, there are a couple of other things that also stand out when it comes to HSAs, but these things don’t usually get as much attention. One is from the account holder perspective and the other is from an employer’s perspective. 
Benefit to the HSA Account Holder. Unlike Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs), HSAs do not require third-party claim substantiation. FSAs and HRAs require someone other than the employee to verify the expense incurred was a qualified and eligible expense. Usually, this is done by a third-party company who administers the FSA or HRA on behalf of an employer. 
Often, someone covered by an FSA or HRA will have a debit card provided to them to use for their expenses. Even if the debit card is used at a doctor’s office or hospital, the FSA or HRA administrator may need you to provide additional documentation about the expense. Due to IRS rules, failure to provide the additional documentation in a timely manner may lead to deactivation of the debit card or other actions. This creates a burden on FSA and HRA participants. 
HSAs, on the other hand, have claim substantiation requirements, but’s it’s a self-substantiation requirement. The HSA account holder is the one that verifies if an expense is or isn’t an eligible expense. That means no documentation or paperwork needs to be provided to a third party after an expense has been incurred. It makes HSAs much more consumer friendly and easy to use in this respect. 
Benefit to the Employer. Many benefits offered by an employer are subject to non-discrimination testing. These tests are generally designed to make sure rank and file employees are eligible for and receiving similar benefits to highly compensated employees. These tests can be complicated and are supposed to be performed throughout the plan year. Employers will usually need to rely on their legal counsel for assistance or they’ll need to outsource the testing. 
FSAs, HRAs, and self-insured medical plans are examples of plans subject to non-discrimination testing. Guess what? HSAs are not subject to testing. Administratively, that makes HSAs easier for an employer to offer. It should be noted that HSA contributions made through a Cafeteria Plan are included in the overall Cafeteria Plan non-discrimination testing, but HSAs do not have plan-specific testing that also applies like FSAs, HRAs and self-insured medical plans do. 

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