There’s a common belief that employees prefer – and benefit more from -health reimbursement accounts to health savings accounts. The reason, of course, is that employers fund HRAs. Employees pay for HSAs themselves.

But one survey suggests that employees see things differently. A poll of 130 organizations with multiple health plan choices – including an HRA and HSA — found that more workers chose the HSA over the HRA.

The reasons: portability and versatility. Unlike an HRA, employees can take an HSA with them if they
leave the organization. And, for HRAs, employers set the rules for which medical services employees can and can’t be reimbursed for.

With an HSA, the account’s use is entirely up to the employee and can be accessed via a credit/debit card tied to the account. Unfortunately, some folks misuse HSA funds and use the money for non-medical purchases (in response, Congress has been weighing  proposals to put tighter controls on people’s access to HSA money).

A few years ago, health savings accounts (HSAs) were hailed by some as the most promising solution to the sky-high health costs. Nowadays, they’re seen by many as a flop – bogged down in IRS red tape and useless to all but young, healthy, and/or high-income employees.

But a recent insurance industry study by America’s Health Insurance Plans’ Center (AHIP) discovered a 37% increase in HSA enrollments over the last year. Key reasons:

• The growth of wellness programs has helped make HSAs more realistic for employees enrolled in high-deductible health plans
• More employers are willing to contribute to employees’ HSAs, providing a stronger enrollment incentive, and
• Employees are getting the hang of managing their own accounts.The average HSA contribution in 2007 was $1,380 for the year. The average total deduction was $1,080.

A powerful combo with wellness

In general, the employers that have had the greatest success getting employees to sign up for health savings accounts have been firms with wellness programs.

But the wellness program needs time to do its thing before employees are ready for HSAs. One report suggests that the wellness program should be in place at least two – and preferably three – years before the HSA is likely to get widespread buy-in and help moderate or cut costs.

Are your policy and procedure manuals a lawsuit waiting to happen?

There’s no law that require you provide employees a benefits handbook or manual. But best practice is to have one, so long as you follow some basic rules for what needs to be in there, and what should never be in there. Three sections to review immediately:

• pay policies (especially overtime)
• FMLA, and
• paid leave.

Your choice of wording in these sections could make or break your company’s case if an employee sues. Following are three of the biggest red flags that many firms ignore.

Handbook Taboo #1: Overtime policy violates FLSA

Many handbooks contain the following dangerous statement: “Authorized overtime is paid at 1.5 times the hourly rate.”

From a legal standpoint, that’s the same as saying “Our organization is non-compliant with FLSA’s wage and hour laws.” Under FLSA, if a non-exempt employee works overtime – whether it’s authorized or not – you must pay the overtime rate. No exceptions.

What’s legal is to create policies designed to prevent unwanted OT before employees work it. For example, it’s fine for a hanbook to say, “All overtime must be authorized by your supervisor.”

For such a policy to be effective, however, it’s necessary to have formal procedures for OT-authorization. Your handbook must describe these steps (e.g., written permission from a supervisor), as well as any disciplinary procedures for breaking the rules.

But once the hours are worked, it’s too late not to pay for it. Even if you pay for OT (whether authorized or unauthorized), the mere suggestion in the handbook that you may be withholding pay for unapproved OT could get you sued under FLSA.

Taboo #2 : Vague language on FMLA coordination

Writing FMLA policies in your manuals is one the toughest challenges in creating a compliant handbook.
Federal law says that if you have a benefits manual, you must describe how FMLA overlaps with other company benefits.

Example: Do you require people to use available paid leave and FMLA concurrently? If so, you must include this info in the FMLA section of the handbook.

Otherwise, the employee is entitled to “save up” their 12 weeks of FMLA until after paid time is used up. The result is your organization’s benefits manual accidentally gives away extra family or medical leave that is now protected by the law.

What happens under these circumstances if you terminate an employee for attendance policy violations? Assuming that the excessive leave was the reason for termination, the chances are that court will look at what’s written in your manual and rule in the worker’s favor. 

Taboo #3: Unclear paid time-off policies

Whether you have separate sick time and vacation policies or a single paid time off bank, your manual should be crystal clear on how leave is accumulated, and when and how it may be taken. 

Example: If you expect employees to file written vacation requests signed by a supervisor, but your manual only says “written request” and neglects the need for supervisor approval, a request denied for lack of a supervisor signature may not hold up if the employee challenges it.

When reviewing your paid leave policies, make sure the manual is clear on its descriptions of:

• Eligibility. Do part-timers and/or temps qualify? If so, when?
• Accrual. How do you calculate the banks (e.g., one year of service = 18 PTO days per year)?
• Use. How soon can an employee take leave? Do unused days roll over to the next year or are they calculated on a use-it-or-lose-it basis?

Policies versus procedures

In re-reading any section of your manual, ask yourself, “Is this a policy or is it a procedure?”

Here’s the difference: A policy is where your company stands on a certain issue, such as a policy banning employees from smoking. A procedure is how you get things done. Example: Employees who participate in a smoking cessation program must submit for reimbursement through your Payroll department.

The sections in your manual that describe policies must contain:

• specific descriptions, such as, “Employees may not wear shorts to work,” and
• enforcement details, such as what will happen if an employee violates the dress code?

Meanwhile, sections describing procedures should also be as specific as possible.

For example, compare these two handbook statements for requesting family leave:

1. “If an employee is aware of a need for family leave 15 days or more before it is to begin, the worker must file a request for leave within 15 days of the start date.”
2. “If there’s a foreseeable need for leave, the leave request must be filed ahead of leave within a reasonable time. ”

The first statement is clear and protects your firm if the manual is challenged in court. The latter is open to debate – and possibly lawsuits.

In truth, it varies.  In some cases, an HSA-eligible plan may cost the same as a non-HSA high-deductible plan. In others, the premiums can actually be more expensive, a recent NHPI report finds.

As a matter of fact, a non-HSA plan offering similar coverage can carry a monthly per-employee premium that’s about $15 to $25 lower and a deductible that’s $500 to $1,000 lower than the HSA option.

Sometimes the difference is due to price-jacking: The HSA plans are the ones that’ve been hyped in radio commercials and mentioned in newspapers in recent years. Nowadays, fewer people exploring high-deductible plans ask first about the non-HSA, so insurance companies sometimes slash prices to drum up interest in those options, too. Another factor: Not all deductibles work the same.

Deductible cuts both ways

Two deductibles can look similar but work differently, and the cost scales can tilt in favor of either an HSA or a non-HSA plan. Example: HSAs by law can no longer allow first-dollar coverage of prescription drugs. But a non-HSA plan can.

On the flip side, HSAs often feature better preventive-care coverage. In some non-HSA plans, a person who has yet to meet the deductible must pay out of pocket for standard tests (example: cholesterol testing) that’re part of the routine physical. Only the office visit itself is covered.

Also, HSA-eligible plans have to follow rules that limit total out-of-pocket costs. But this can push up the premiums paid on the front end.

Best bet: Double-check with your broker to make sure you’re comparing apples to apples when reviewing the costs of HSA and non-HSA plans.