Many
things have changed since HSAs began in 2006. Although,
it is still difficult to compare and analyze what
provider has the best HSA. This article will address
the most important features employers and consumers
should be looking for in a HSA, while also providing
a list of questions that will assist consumers in
choosing the provider with the highest level of
service and product knowledge - at a reasonable
price. In addition, a special section has been added
for employers and HR directors. HSAs can be a great
option for many people, but with the wrong administrator,
they can be a nightmare in confusion and mis-information.
ESSENTIAL FEATURES OF A HEALTH SAVINGS ACCOUNT
Although one would think all HSAs
have similar features and benefits, the reality
is most HSAs do not offer the essential features
needed for a HSA or they offer them for an extra
fee. If your provider doesn't offer these following
features, it might be time to look for a new provider
1.
Online Banking and Online Bill Pay
2. Monthly Statements
3. Debit Card
4. Low or No Fees
5. Nominal Interest Rate
6.
Customer Service
1.
Online Banking and Bill Pay - Accounts
are owned by the individual, not the employer. As
a result, you should be able to tap into your HSA
account in several ways without any complications
or delays. More then likely, your bank will not
be located in your home town, so online access to
your account is essential. In addition, online check
writing should be a requirement as it is the easiest
and safest way to pay your medical bills.
2.
Monthly Statements – Many banks do
not provide monthly statements for their HSA product
or only provide online statements and will charge
you extra for traditional paper statements. Look
for a bank that provides online and traditional
monthly statements mailed to you directly at no
extra charge. Record keeping is very important -
especially if you get audited!
3.
Debit Card - The debit card is important
as your medical coverage card as most doctor offices
accept both debit and credit cards. Since you will
be paying a larger deductible, count on using your
debit card at least 12 times a year. In addition,
if you have a spouse, you will need a 2nd debit
card. There are a few banks that do not charge you
for this second card. Others will charge you $25
or more.
4.
Low Fees – I can not stress how important
fees are to the future value of your account. Everyone
focuses on interest rates and banks do a good job
of hiding fees and promoting high interest rates
that are rarely achieved until you reach a $10,000
balance. However, our extensive analysis on HSAs
shows that fees have a far greater impact on the
future value of the account then interest rates,
especially in the first 3-5 years. Please read our
article titled, “The
Hidden Fees of Health Savings Accounts”
It is essential
reading before purchasing your HSA. If you don’t
have time to read another article on HSAs remember
this: If your provider is charging you a setup fee
or annual fee over $30, keep looking! Also, watch
out for closing fees and per transaction fees. Banks
usually don’t disclose this information up
front.
5.
Interest Rates - Everyone wants to maximize
their savings and investment, HSAs included! But
don’t be drawn into advertised high interest
rates being offered with HSAs. Many banks are advertising
rates of 2% or higher. However, they fail to mention
the required balance is $10,000 to $15,000! In addition,
banks that usually have the highest interest rates,
also have the highest fees.
Lastly, this will be a transactional account much
like your current checking account. Don’t
worry about investing in stocks or mutual funds
at this point. When is a good time to think about
mutual funds for your HSA dollars? Our rule is when
your account balance is double that of your annual
medical deductible. Until then, you want this money
liquid and readily available. Think of your HSA
more like a checking account then a 401K, despite
what financial planners tell you!
6.
Customer Service - Call the provider
before you enroll and ask them a few questions.
Everyone has a great looking website, but when you
have a problem and want to speak to a live person,
the website won't answer your question. The best
example I can use is when I buy a car from a dealer,
I first go to the service center and ask a few questions
and observe the level of service. For the next 4-6
years I will be dealing with the service dept and
not the salesman that sold me the car.
Other
features
For
people that are not comfortable with debit cards,
traditional checks are a must! However, make sure
to read the fine print, many banks are charging
a per check fee over $1.00 per check. Finally, what
about Mutual Fund options for your HSA? 90% of the
people ask us about Mutual funds and HSAs, mainly
because they view the HSA much like a 401K. Remember,
your HSA is a transactional account, which means
you are going to be using it a regular basis. Mutual
funds are not exactly liquid accounts, nor are the
fees structured for numerous transactions.
WRITTEN
IN 2006
- Stick to a interest bearing checking account and
make your HSA simple. What about the people who
are not going to touch the funds and are using it
as an investment. Our advice, find a CD for 2005-2006.
They are paying over 4% (tax free). Based on the
fees, investment portfolio and in my opinion, the
over-pricing of the market in general, I would hold
off on the mutual fund options until fees decrease
and the market settles.
2010 - With interest
rates being at 1% or less, some alternative investments
should be considered if your account balance is
above $3000 or if you do not intend to use your
HSA dollars for short-term medical expenses. As
always, mutual funds can lose value (remember your
401K in 2008!)
EMPLOYERS
/ HR DIRECTORS
If
you are a HR director at a company and offering
a HSA option for 2010, you will probably be offered
the HSA provider that has partnered with the health
plan carrier that is offering the HSA qualified
health plan. The terms "seemless intergration"
will be mentioned - which sounds very good, although
it is never really explained what it means. Regardless,
it sounds simple so you decide to take the brokers
advice. However, after your employees sign up, the
fees start appearing on their monthly statements.
If you are using the HSA through JP Morgan Chase,
those fees with average $70 per employee, for the
first year. Unfortunately, you were unaware that
HSAs can be found with zero fees with banks that
have been offering HSAs since they were established
two years ago.
Alternatively,
the local bank down the street is now offering HSAs.
The fee is only $3.00 a month and the employees
are happy because their money is with a local bank!
Unfortunately, the local bank just started offering
HSAs and a little unsure how they work and the necessary
forms that are needed.
Does
the bank have a simple process for determining what
year the deposits will be credited to for the first
4 months of year? More importantly, your employees
are asking you new questions every day on the use
of these new accounts. You refer them to the bank,
Big mistake, because the bank knows nothing about
the use of these accounts, they just started offering
them two months ago. Your next call is the health
carrier, who says "Employees should consult
with their accountant". Of course, every person
has an accountant..
This
example highlights a very important question you
must ask the insurance broker, health carrier and
provider - "When my employees have questions
on the use of their HSA, do any of your organization's
have a HSA Expert, in-house that is available to
answer detailed questions on a timely basis?"
In two years, I haven't heard more then 3 people
answer yes!
SUMMARY
It's
important to find an HSA administrator that can
provide superior customer service, product knowledge,
convenient account access, and reasonable pricing.
This allows you to get the most out of your HSA
deposits, while making your account easy to use.
While
HSAs might be new and a little confusing, it's easy
to see the potential for growth and continued tax
benefits through the utilization of this new product.
But, ease of use is your number one concern for
the first year
Before
you open an account test out their customer service
and product knowledge. If you are put on hold for
10 minutes, like we were when we did our test, keep
searching. There are great providers offering HSAs
are reasonable rates with all the features highlighted
above.
Lastly,
make sure the provider discloses all the fees associated
with their HSA, along with the procedures for contributions
and withdrawals. Don’t focus on the interest
rate, in most cases, fees will have a greater effect
on the future value of the account then interest
rates.
Questions You Should Ask
