A benefits plan is a promise between an employer and employee. However, employers may periodically change that promise, for a wide variety of reasons. Some of those reasons include achieving greater cost control, reducing future spending, improving flexibility, increasing employee choice, aligning benefits with compensation philosophy, or simply because they aren’t happy with the way their current plan is structured.
Each of these is a possible reason an employer might transition from a conventional benefits plan to a healthcare spending account (HCSA). When compared to a conventional benefits plan, an HCSA offers greater cost control and increased flexibility for both employers and employees. It can also be used as a tool to better align with the company’s compensation philosophy or to restructure a restrictive benefits plan.
Since an HCSA is so different from a conventional benefits plan, it is a big change to the promise for the employer and employees. That’s why a careful, planned transition is important once you have decided to make the change.
Below are four essential steps to ensure a smooth transition from a conventional benefits plan to an HCSA:
1. Be Aware of the Smaller Differences between
If you have already decided to transition to an HCSA, you likely know the major differences between it and other types of plans; for example, an HCSA is a defined contribution plan while a conventional plan is a defined benefit plan.
Don’t know the details about HCSAs? Download our free eBook: The Smart Employer’s Guide to Healthcare Spending Accounts!
Smaller details about HCSAs can be overlooked, however. One of the most notable examples is that an HCSA does not include a drug card.
If you are looking for a plan that includes certain elements of conventional plans, but also gives the flexibility of an HCSA, you may want to consider transitioning to a hybrid benefits plan instead of a strictly HCSA plan. With a hybrid plan, you could keep a prescription drug benefit (and card) while the rest of the benefits funding goes to the HCSA.
Hybrid plans offer many options along the scale from defined contribution to defined benefit, with an HCSA as one part of the benefit promise. You can decide how large or small a part is best for your group.
If you want to introduce a standalone HCSA plan, be sure to ask your benefits advisor about all the details you should know.
2. Review Your Benefits Plan Budget
Whether you would like to transition to an HCSA with the same level of funding you have now, or you’re looking to reduce spending, you need to review your benefits budget before making any major changes.
Work with your advisor to do an analysis of your existing plan’s funding. Together you can determine the benefit amounts to make available through your HCSA that will meet your budgetary goals. We can help with illustrations that take into consideration your current plan’s actual paid claims experience.
3. Assess the Groups within Your Group
In many conventional plans, everyone across the organization has the same level of coverage – regardless of seniority, job title, or performance.
Part of the flexibility of an HCSA is the ability to set specific benefits amounts for the different groups within your group.
This means you can determine how you want to define the groups within your group, and how you want to compensate each group. This is great opportunity to align your benefits plan with your compensation philosophy, offering a highly attractive set of benefits to key groups of employees who are critical to your business.
4. Communicate the Changes with Your Employees!
Communicate, communicate, communicate! Any time you are making a change to employee benefits, effective communication throughout your organization should be a top priority.
Communicate internally in a way that makes sense for your specific business: send email announcements to employees informing them about the change, hold employee meetings to review your new benefits, ensure all employees receive new booklets outlining the plan.
You want to ensure that employees feel comfortable with the change, they know the advantages (including the greater range of eligible medical and dental claims), they understand how an HCSA works, and they know how to use their new plan.
With a well-planned and executed transition, an HCSA is a practical, affordable, and flexible way to meet the diverse needs of both your business and your employees.
The Benefits Trust can help you transition to an HCSA, integrate an HCSA into your current plan, or build a new customized benefits solution unique to your business. Contact us today!
More on HCSAs from The Benefits Trust: