Susan Berry just returned from a national conference on compensation and benefits where she attended a session on Health Savings Accounts (HAS). Susan is the Human Resources Director at Frontline PR and her company has been struggling with the cost of healthcare insurance. After speaking with several experts at the conference, Susan now thinks an HAS might be a viable option for the company. Frontline PR is a public relations firm located in the Northeast that employs close to 150 people in four different offices. Public relations professionals make up most of the staff, but they also employ a complete administrative and operations staff. All of Frontline's employees work full time schedules and are eligible to participate in their healthcare insurance plan. Frontline currently offers a standard fee-for-services healthcare insurance option. The plan has a modest deductible of $300 per year and a 20 percent coinsurance requirement. In addition, the company offers a Flexible Spending Account (FSA) that allows employee's to set aside pretax earnings to pay for the deductible, coinsurance, and other medical expenses. Susan is considering offering a HAS along with high-deductible health insurance plan instead of the current insurance plan and FSA. At the conference, Susan learned that making such a change could result in significant cost savings for a company. The high-deductible health insurance plan would cost a lot less for a company than the standard fee-for-services plan that Frontline currently offers. While Susan suggest the Frontline make contributions to each employee's HAS, the overall costs for the healthcare benefit would still be less than its current option. Beyond cost savings on premiums, many believe that consumer-driven healthcare tends to reduce overall healthcare costs. Some of the experts Susan spoke to at the conference stated that when employees have a greater say in their healthcare decisions, they make wiser decisions and do not spend as much on healthcare. Susan has discussed the HAS option with Frontline's Director of Finance, Allison Jones. From the financial perspective, Allison agrees that the option would be a good step to start controlling healthcare costs. However, as an employee who would use the benefit, Allison isn't so sure that an HAS with a high-deductible health insurance plan is the right option for the company. Based on Susan's initial explanation, Allison didn't really understand how the HAS worked. Further, she was concerned that she would have to spend more out of pocket on her own healthcare. Susan is convinced that the HAS option would offer a significant cost savings to Frontline. However, after her discussion with Allison, Susan is still unsure if it is the right path to recommend for her company.
QUESTIONS:
1. What are some advantages of implementing the HSA option?
2. What are some potential disadvantages of the HAS option?
3. What do you recommend? Why?