Beyond Use it or Lose it: Why FSAs Save Money and Make Good Sense

For years employers have been pushing the word “consumerism” into benefits strategy and trying to educate people about what it is. Unfortunately, too much of the emphasis has been to get employees to enroll in “consumer-driven” high deductible plans.

In reality, anyone can be a smart consumer of their health, with or without a high-deductible plan. Being a smart consumer means you evaluate your needs carefully when you enroll in your plan but also when you use your care throughout the year.

It means you take advantage of ways to save money — like using generic prescriptions, only seeing network providers, going to the urgent care instead of the ER. It means you think about quality and cost (and know that higher cost doesn’t necessarily mean better care). And, it means that you budget for health care expenses.

Only 20% of employees sign up

Flexible spending accounts are a great tool to promote health care consumerism. They can work with a traditional PPO or an HMO and reinforce all those good consumer behaviors we want. Employers should be promoting flexible spending accounts as another good way for employees and their families to save hundreds of dollars a year. In other words, to be good health care consumers!

Nearly 37 million private-sector employees have access to an FSA (91 percent of employers offering reimbursement accounts offer FSAs). Yet, only an estimated 20 percent of employees sign up for the benefit. That leaves out a large majority of people who aren’t taking advantage of it.

And, no wonder: most communication materials focuses on the “use it or lose it” rule, not on the value of FSAs. And, many employees remember painful claims submission processes and don’t realize the ease of FSA debit cards. With the changes in FSA rules resulting from health care reform, use enrollment as an opportunity to reeducate employees about the value of plans — and the simple ways FSAs can save them money.

Wageworks has a new site to help you do that: www.savesmartspendhealthy.com. The website educates people through videos, design and expert advice—and that ever important calculator. The website explains how to approach the plan –- start with identifying your household’s annual health expenses, for example –- and gives step-by-step instructions on what to do to set one up. It also lists eligible expenses by category – doctor and hospital visits, prescriptions, over-the-counter medications and items and other expenses.

The false fear of “use it or lose it”

Encouraging your employees to think about how much they spend annually on medical expenses could alleviate one of the biggest fears people have about the plan—the “use it or lose it” rule. Oh, and by the way, the median amount forfeited by employees using FSAs is a not-so-scary $100.

The resources to help people understand FSAs are there. Employers should make sure everyone is a good consumer of their health, not just those enrolled in high-deductible plans.

PS: Offering FSAs and you have an HSA-qualified high-deducible health plan? Yes, there are some complications with having a regular FSA along side a limited-purpose FSA, the only kind that can be used along with a health savings account. But, don’t let this complication prevent you from promoting FSAs altogether.