HSAs/HRAs for Dummies Rob J. Thurston Anamaria Szekely   Now that you have read all you can about Consumer Driven Health Care Plans (CDHP), about the new HSAs (effective 1/1/2004), and HRAs (since 6/2002); you probably want to know how to implement them. This is the first part of a two part article that will give you practical advice, step-by-step instructions on how to overcome the five common objections about HSAs/HRAs, how to do plan design, find trustees, custodians, documents, communication materials, and administration options. It Takes One to Know One Back in grade school- the bully of the class would usually pick on someone and try to hurt them. He would say mean things and many of us would stand by passively and think to ourselves: "Well, it takes one to know one." Very seldom would some brave soul (with very little sense of mortality) say out loud: "It takes one to know one."

You might be offended that I have titled this article: HSA/HRA for Dummies. You are probably thinking to yourself: "Well, it takes one to know one". And you would be right. Over the years since 1981 I have probably made every mistake you could make in benefits. I have acted like a dummy and have proved many times that I am a dummy.

So why do I bring this all up? Because I have spoken at many conferences lately and talked with thousands of people about HSAs/HRAs. And many of them in my opinion are acting like dummies. When they think about HSAs/HRAs automatically in their minds one of the following objections takes place:

"I can't do a HSA/HRA because of:

1 lack of clarification and regulations from the IRS/Treasury.
2 there is no tested, fully functional administrative software or Administrators out there.
3 there are no easy-to-follow steps and methods to evaluate Provider/Vendor HSAs/HRAs
4 there aren't any good High Deductible Health Plans (HDHP) available in my area
5 I can not find a good trustee/custodian."

As a dummy myself, it seems to me there are solutions to these objections. I will now try to address them one by one.

1- When will we get Regulations from the IRS?

The IRS has already announced that formal regulations will not be issued until 2005. Wouldn't it be the prudent, wise and cost-effective thing to just wait until 2005 when the final regulations are issued on HSAs/HRAs?

Learn from my mistakes and for being a dummy.

You might be saying it's just too risky. We are living in a world where things keep changing with "light speed". Whatever is shocking and provocative today could be considered obsolete tomorrow. High performers know that change happens, needs to be anticipated and monitored. They predict the change, adapt to it quick and enjoy it. This is one of the reasons why are they are considered high performers.

If you do not change you can become extinct.

You do not need to be scared of the so-called lack of regulations. Here is why. I have been in the benefits practice for a while now and I have never seen the IRS/Treasury move as fast as they have on HSA benefits legislation. The Treasury has created a website just for HSAs: www.ustreas.gov/offices/public-affairs/hsa/faq1.html.

As a matter of fact, their own boss Secretary Snow of the Treasury is impressed with the speed: "I applaud the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) for issuing guidance that will make it easier for employers to adopt Health Savings Accounts (HSAs). Health Savings Accounts are designed to help individuals take more control over how their health care dollars are spent and save for future medical and retiree health expenses on a tax-free basis.

The Treasury Department will continue to issue the guidance that the private sector and industry needs to ensure that Health Savings Accounts will be available to all Americans". (Secretary Snow Praises Department of Labor For Issuing Health Savings Account Guidance, U.S. Department of Treasury, Thursday, April 8, 2004)

From all this is pretty obvious that HSA is considered a priority for IRS, Treasury and the Department of Labor.

With all this being said I really hope that you realize that waiting on HSAs/HRAs is dumb. You do not want to act like that, do you?

2- There is no fully tested Administration Software/Administrators to do HSAs/HRAs-

I would like to tell you something different. There are many software systems and Administrators out there.

I have done the research and found over 15 software vendors and over 30 Administrators who can do your HRA right now. HSA software is being programmed and developed right now and many firms will be able to do them at the beginning of August, 2004*.

The speed at which technology can change is increasing each day. I've got a list of software and vendors for HSAs/HRAs. But I need to warn you that it might be obsolete in the near future but I will still share it with you**.

You can take the time, expense and headache of doing your own research but you might be disappointed. State-of-the-art technology has become a constantly moving target, and just when you think you have the latest and greatest, it's devastating to realize you don't have it at all. Obsolescence is a fact of life, and it will usually occur right after you have implemented a new system.

How can a Benefits pro stay ahead of the technology curve? How can you be sure that the decision you are making today will still work tomorrow? You can't.

I have a story for you that explains this:

It seems like a million years ago, and in techno-time it probably was, but actually it was only 1981. I worked for, what was considered at the time, to be one of the most innovative and strongest companies in the world -- IBM. Not just IBM, but IBM corporate. Headquarters. New York. As in city.
In 1981, there were two mottos that were part of the IBM culture: "Mainframes are our business." and "No one has ever been fired for recommending IBM."

A large meeting was called and the rumor mill was in full force with the speculation that IBM had a revolutionary new system that would keep it the ruler of the hardware world. And we lucky employees would get to witness history by seeing it first.

Buck Rogers, the senior vice president of marketing at the time, stood in the middle of the IBM conference center surrounded by hundreds of spellbound Big Bluers. Next to him was a small table containing an object, hidden by a draped cloth. He finally removed the cloth and we beheld a small machine with two openings. It was not much bigger than the IBM Selectric typewriter. None of us knew what it was, but it didn't look like much.

Yet Buck Rogers, in all solemnity, declared, "This is our new business." It was the IBM 8088 dual floppy drive Personal Computer (PC).

I thought, "Mainframes are our business." My brother, who had been one of IBM's top sales people said, "This will never replace the IBM Selectric typewriter."

This was in the summer of 1981.Within three years; PC hardware was the focus of IBM. The end of 1984, my brother's sales division had closed because no one was buying Selectric typewriters.
What we learn from this is that no matter what administration software or Administrator you select- they might be "obsolete" in the next few years. But waiting is a dummy decision.

Consumer-directed Health Plans (CDHPs) are the latest in a wave of changes that impact the healthcare industry. These new health plans are designed to increase the knowledge and choices that consumers have in purchasing services, including purchasing services from one of several types of spending accounts. The account that has generated the most interest is the health reimbursement account (HRA). These plans allow employer-funded account money that is not consumed to be rolled over year to year.

I think and hope that the facts and stories stated above will make you change your mind and you would think about acting now (implementing HSAs/ HRAs), before is not too late.

The answers to the remaining three questions (about easy-to-follow steps to evaluate Providers and Vendors HSAs/HRAs, where to find a good HDHP and where can you find a good/ trustee custodians ) will be addressed in Series #2 of this article.

* Steve Brown, April 2004, Employee Benefit Advisor, " HSA software ads admin support to Client Appeal."

** HRCG has available at no cost or obligation a comprehensive listing of software and consulting firms providing advanced technology systems for benefits enrollment, communication and administration. Please request this list by calling Mr. Thurston at (801) 765-4417, email hrconsultinggroup@msn.com, website www.hrconsultinggroup.com or writing: HRCG, Inc., 1202 E. Dover, Suite 201, Provo, UT 84604.

Anamaria Szekely, Organizational Development Consultant for Human Resources Consulting Group, has worked in several international locations (Europe) and in the United States as a human resources consultant. She graduated from the Babes-Bolyai University, Romania, her major being Organizational Behavior (Psychology). She designed and implemented various projects on areas like organizational diagnosis, job security and performance evaluation.