The rising cost of health care coverage: employers struggle to keep up with fundamental changes in benefit offerings.

• Author: Wilder, Brent
• Position: Cover Story

With historic double-digit increases in employer insurance plan costs over the past several years, many executives are at their wit's end to find ways to absorb price spikes while continuing to provide a viable benefits package to their employees.

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However, HSAs and HRAs can work in conjunction with one another through employer benefit offerings for HSA-eligible HDHP participants.

According to the Kaiser Family Foundation, nationwide only a little more than 2 percent of non-federal covered workers are enrolled in HDHPs with an HRA. Slightly more than 1 percent are enrolled in plans eligible for use with an HSA. Stanisa says that in the next five years, HSA and HRA participation might jump to 20 percent of the work force.

Choices Drive Change

Businesses moving away from primarily employer-funded insurance programs wisely offer more than one plan to employees, says John Wain, CPA, principal of Independence-based Alpha Group Agency. "This gives employees a choice in the ever-increasing employee cost-sharing burden."

Wain says employers should consider continuing to offer a "Cadillac"-type health care plan with employees paying an adjusted higher premium to participate, in conjunction with an HDHP option. Employers can offer a flat contribution toward annual health care costs and let employees pick how to spend it between plan options, he says.

"Employees can decide for themselves how much medical activity they think they're going to have within the enrollment year, as opposed to only having a 'one size fits all' plan that really isn't appropriate any more," Wain says.

Wain says employers can motivate employees to pick HDHPs linked to HSAs by giving back some of the employer premium savings to HSA plan participants. Using a set contribution, the employer can offer all of its premium share to the insurer for a higher premium, low deductible plan; or give part of its contribution to the insurer and part of its contribution directly to the employee for HSA plan participants, he says.

"The biggest issue is changing the buying habits of the general population within the HSA plan," Wain says. "If they spend less on health care, they save some of the employer contribution as an untaxed investment."

Under the rules of HSAs, participants will also be able to use the money for untaxed purchases of related medical expenses, such as vision and dental services and products, over-the-counter pharmaceuticals, and insurance premiums including...