It's likely that health savings accounts will remain part of the benefits landscape regardless of the final outcome of the current push for health care reform.

Indeed, there is some speculation on a variety of proposed changes - from whether HSA contribution rates will be tied to proposed caps on annual out-of-pocket expenses for health plans to eliminating the use of HSA funds to purchase non-prescription medications.

Nonetheless, according to a survey conducted last year by Watson Wyatt and the National Business Group on Health, HSAs were offered by 34% of companies, a number that is expected to increase to 43% this year.

HSAs are likely to become a more viable option for a number of reasons. First, with escalating premiums, employers are moving toward high-deductible health plans that generally cost less than traditional health care coverage. In a survey conducted by Buck Consultants, an overwhelming majority of employers (96%) said that HSAs allow them to continue offering group-sponsored health insurance.

Second, HSAs promote price transparency and increased consumer responsibility, resulting in cost savings for the employee and employer. Third, HSAs are a sound financial investment because dollars that would otherwise go toward premiums can be accumulated tax-free in a fund and disbursed with no time limit.

Tax and compliance issues

From a tax and compliance standpoint, HSAs allow employers to provide employees with benefits that are similar to those of flexible spending accounts and health reimbursement accounts. However, because the employer does not own the accounts, there is no requirement that medical expenses be submitted to the employer for substantiation.

The employee simply pays for medical expenses out of the HSA and retains receipts for tax filing purposes, much in the same way receipts are kept for charitable contributions. This also reduces the administrative overhead required on the part of the employer. However, because the employee owns the account, once the employer contributes to the account, the funds are the employee's to keep.

Employers also need to make sure they are meeting HSA contribution comparability rules, which require that employers make comparable contributions to similarly situated groups of employees. Failure to do so could result in a 35% excise tax to the employer. One way to avoid violating these comparability rules is to offer HSAs through a Section 125 cafeteria plan, which also allows employers to provide HSA contributions as matching contributions or as an incentive to participate in employee wellness or exercise programs.

In addition, the employer's contribution or employee salary reduction contribution (through a Section 125 Plan) can be made to the HSA on a pre-tax basis - the employer can contribute directly to the accounts before computing FICA and income taxes. This benefits both the employer and employee.

Why are HSAs underutilized?

HSAs offer the benefits of putting more responsibility in employees' hands and lowering contribution rates for employers. However, they are not as widely used as they ought to be, due to several impediments. First, confusion persists among employees about HSA requirements and restrictions, which may lead to underutilization.

In addition, HSAs are still viewed as commodities, and the key differentiator in the purchasing decision is administrative cost. Moreover, HSA enrollment is often fraught with inefficiencies because it requires a separate process.

The root cause of underutilization by both employers and employees is that HSAs are typically not treated as a core benefit offering. However, given their growing popularity and potential ROI for both employers and employees, elevating their status by integrating them into the online enrollment process simply makes sense. Doing so can streamline administration for employers, assist employees with the decision making process, and provide brokers and advisers with a key differentiator and a value-added proposition to bring to market.

Not just any platform

Not all online benefits enrollment solutions are created equal - especially when it comes to an integrated platform that needs to handle multiple benefits from different carriers, as is the case with an HSA. When multiple vendors are involved, it's critical that the solution be able to interface on an IT level as well as be in compliance with legal requirements such as HIPAA. Brokers must be secure in knowing that the solutions they use and recommend to their clients will perform flawlessly and seamlessly.

For example, a key feature that is essential in today's environment is a fully automated EDI data exchange, which provides connectivity among employer groups, insurance carriers, third-party administrators, payroll vendors and brokers - ensuring a seamless, transparent, accurate and secure process.

While there's no shortage of solutions in the market, a next-generation benefits administration platform can offer much more than just online enrollment. An increasing number of employers are turning away from one-time online enrollment solutions and looking for a "leave-behind system" for benefits administration. One advantage of this type of system is that rather than only having access during open enrollment, brokers, employers and employees can access it 365/24/7.

Leave-behind systems also offer increased HR functionality, including immediate and ongoing access to employee handbooks, carrier sites, claims information and benefits schedules. Of course, leave-behind systems integrate fully with other functionalities that handle core medical, dental and vision benefits, voluntary products and flex benefits (i.e., HSAs), as well as TPA services, and they work seamlessly with an existing HRIS, payroll or COBRA administrator.

Another hallmark of a best-of-breed enrollment solution is its ability to improve the employee experience. However, it goes beyond the expectation that the process should be accessible and easy. When it comes to benefits enrollment, the key for employees is information - and lots of it. Tools like online calculators facilitate the decision making process and provide employees with demonstrable evidence to support their choices.

For instance, a built-in calculator can project overall plan cost savings for an individual using an HSA and HDHP versus a traditional option such as an HMO, accounting for factors such as family size or past health care expenditures. Other tools can simplify complex HSA regulations and calculate an employee's maximum HSA contribution.

Brokers are ideally positioned not only to provide trusted advice on benefit offerings, but also to assist clients with the selection, implementation and ongoing support of a best-of-breed integrated benefits administration solution that can help them battle health care costs.

Moreover, with all signs pointed toward HSAs being a larger part of the equation for health care in the coming year, an integrated solution where employees can select an HSA from among traditional benefit offerings - and are provided with information, tools, and calculators that can help them decide how this option is best suited for them - can help streamline administration and increase utilization. It's a potential win-win outcome to the health care debate at least on one front, delivering benefits to brokers and the employers and employees they serve.