Flexible Spending Account Administration Best Practices 12 Secrets to Running a Successful Benefits Program WW-2164-FSA-Best-Practices (Jul 2009)
Flexible Spending Account Administration Best Practices 10 Secrets to Running a Successful Benefits Program Summary When administered correctly, FSAs can serve as a valuable investment into your employees health and financial well being. Taking the following best practices into consideration will help you take full advantage of everything that FSAs have to offer. 1. Offer at least three distinct reimbursement options Empowering your employees with multiple payment options allows them to choose the reimbursement method that works best for their individual circumstances and ultimately increases participant satisfaction. At a minimum, your administrative partner should offer at least three of the following reimbursement choices: A compliant health care debit card Online bill pay Check reimbursement Direct deposit Carrier feeds Your FSA administrator should also have the ability to synchronize these payment options to ensure that account balances remain accurate. By taking this step and offering multiple payment options, you ll make it easier for employees to take advantage of their hard earned dollars. 2. Be prepared for the inevitable by partnering with an FSA administrator that can keep track of changing regulation With healthcare reform at the top of the nation s agenda, it s more important than ever to partner with an FSA administrator that can quickly adapt to new regulation. When evaluating FSA vendors make sure you ve considered the following two questions: i. Do they have a proprietary adjudication engine and administrative platform? Administrators that own their own technology don t have to rely on their sub-contractors to adjust and comply with new regulation. ii. Are they a leader or a follower? Industry leaders help to make new policy, not react to it. Administrators that are involved with and take a leading role in groups such as the Special Interest Group of IIAS Standards (SIGIS) are more likely to be current with industry trends and better prepared to adjust and comply with regulatory changes. At the very least, the FSA administrator you select should have a dedicated compliance officer to guide the company s technology and services in the right direction. 3. Be able to report FICA savings A well-run FSA can deliver more than just employee satisfaction it can also significantly reduce benefits costs through FICA savings. While more and more companies recognize the potential for savings, measuring and reporting ROI to management can be a challenge with most programs. A Page 2
good plan and administrator will have established reports that will enable you to easily track the ROI for your FSA program. Such reporting should enable you to easily track and analyze participation and plan contributions. The difference of just a few percentage points can add up to thousands of dollars in payroll-tax savings. Being able to accurately measure and report this data is key to proving the value of the program to your company s management. 4. Consolidate vendors to reduce the cost of ownership, increase ROI, and simplify the management experience No one needs another username and password. Providing a single access point makes life easier for everyone involved (i.e., one login, one password, one account manager). Not only can consolidating vendors help simplify the participant and management experience of your benefit programs, it can also reduce the total cost of ownership and increase your overall ROI. Look for an administrative partner that can offer an integrated platform that can accommodate any combination of participant programs (e.g., FSA, HSA, HRA, commuter or gym). TIP: When evaluating vendors that can offer multiple programs make sure that these types of benefits are their core competency. Also, make sure you understand the differences between banks, health plans and third-party administrators when it comes to HSAs. 5. Debit cards can increase employee satisfaction, but only if you offer one that works When the health care debit card was first introduced in 2002, the industry was abuzz with the changes it would bring to FSAs in terms of ease of use and convenience. But for many administrators, the reality has not quite lived up to the hype. Most struggle to keep up and adapt to changing IRS regulation for the use of debit cards. The few administrators that have been able to anticipate and adjust quickly are ones delivering the best and most consistent participant experience. For example, on July 1, 2009, new IRS guidance required all pharmacies and drug stores to utilize an approved inventory system in order to accept a health care debit card. A good administrator would have anticipated the inevitability of the rule and made plans to implement the change well in advance of the live date. Such planning would have included participant and plan administrator communications that clearly articulated the changes in language that everyone could understand. TIP: Partner with a FSA administrator that can offer card adjudication rates well above 80%. 6. Select one consumer-directed administrator with integrated programs that can help eliminate confusion and increase employee satisfaction Those vendors that do not offer a unified platform for consumer-directed spending accounts (e.g., HSAs, HRAs and FSAs) often suffer from lack of integration and messaging for their customer service support and communications tools. This can lead to a frustrating and confusing experience for your employees. In addition, lack of account visibility is frustrating for many participants and often leads to increased forfeiture rates. The best FSA administrators will offer your employees a single point of access for managing healthcare spending, including a consolidated account statement that details up-to-theminute information on all of their accounts. They will also allow your employees to access their account information 24 hours a day, seven days a week. This kind of visibility creates greater confidence in the program. TIP: Partner with a company that integrates any combination of programs onto one healthcare card. Page 3
7. Break up the monopoly While your health care carrier may seem like a natural partner for your FSA program, an independent administrator may be a better choice if you value quality, flexibility and negotiating leverage. Typically, administrators that only offers FSAs and similar benefits will be able provide a higher quality product for the simple reason that it is their sole focus and core competency. Also, decoupling your FSA from your health coverage provides you with more flexibility to switch carriers if need be and the additional negotiating leverage that comes with being able to walk away from your current vendor if it doesn t meet your needs. 8. Understand what differentiates FSA administrators in the marketplace In today s marketplace, service and technology are two of the most critical components that you should evaluate in an FSA administrator. When looking at each vendor s commitment to customer satisfaction, it is best to analyze the service level data covering an extended time period. One of the most important metrics to consider is the average call answer duration (i.e., the time elapsed before each call is answered). An above average center will be able to answer calls within 30 seconds. Other metrics you should analyze include: call abandonment rate, average resolution time and customer satisfaction scores. In addition to the previous metrics, you should dig deeper to find out what else the administrator is doing to ensure a high level of service. For example, ask if they are employing industry recognized tools to improve their service levels, such as voice analytical and behavioral software. When evaluating an FSA administrator s technology, check to see if it owns its service platform and debit card adjudication system. As mentioned previously, this will help ensure that your program remains compliant with changing regulation governing FSAs. 9. Make sure the FSA program you offer is easy to access and administer Many participants are forced to forfeit their remaining balance at the end of the year when they don t have complete visibility into their flexible spending account. The best administrators will offer your employees real-time access to account balances 24 hours a day, 365 days a year. If you offer multiple programs (e.g., FSAs, HSAs or HRAs) they should also provide a single point of access for managing healthcare spending, including a consolidated monthly account statement that details upto-the-minute information on all participant accounts. This kind of visibility creates greater confidence in the program. 10. Protect your employees privacy With all of the threats in today s digital world, no company can risk the theft or inadvertent release of their employees personal information. Look for an FSA administrator that understands the importance of data stewardship and takes seriously the responsibility of protecting your HR data. At a minimum your vendor s information security program should be based on the ISO 17799/27002 information security management framework. Here are a few more qualities you should look for in your vendor: Use of a PCI-compliant level 1 service provider, certified by Visa CISP Compliance with SAS 70 Type II service audit programs Use of secure and encrypted FTP, SFTP, HTTPS and VPN methods of data transmission as a means of sending and receiving files between parties. All data should be encrypted in storage and their backup media should use AES 256-bit encryption. Compliance with all applicable HIPAA electronic transaction and security standards Page 4
In addition, your administrator s information security policy should require the use of control practices to protect sensitive data stored in database and file systems. The policy should also segregate the duties and responsibilities so that the management of the environment is separated from the development of the product to ensure data and environment integrity. 11. Offer an online learning center to engage and educate your employees Program effectiveness is determined by how well employers and administrators engage and educate employees. This is especially important for FSA benefits that have historically been under-utilized. Today, one of the most effective tools you can offer is an online learning center that contains video tutorials, informative tips, articles and an answer center that can support those employees just starting out as well as those looking for advanced learning. This type of on-demand approach to education will strengthen your employees knowledge and their savings. Remember, there s no substitute for knowledge when it comes to making smart choices about big expenses such as healthand dependent care. 12. Develop a targeted communications plan One of the most important factors in increasing FSA participation rates is to develop a comprehensive pre-enrollment and post-enrollment communications campaign. To get the most out of your FSA program, look for an administrator that can execute a tailored employee communications campaign that leverages a wide array of communication materials, including such things as: content on your company's internal benefits site, Web-based materials, customizable emails, postcards, worksite posters, new hire information, payroll stuffers and onsite materials. TIP: The more time you spend on the creation of messaging designed to reach your company s unique employee population, the more successful your program will be. About WageWorks WageWorks, Inc. is a leading on-demand provider of tax-advantaged programs for consumer-directed health, commuter and other employee spending account benefits, or CDBs, in the United States. We administer and operate a broad array of CDBs, including spending account management programs such as health and dependent care Flexible Spending Accounts, or FSAs, Health Savings Accounts, or HSAs, Health Reimbursement Arrangements, or HRAs, and commuter benefits, such as transit and parking programs. Our corporate headquarters are located in San Mateo, California. We have additional facilities in Arizona, California, Colorado, Florida, Kansas, Michigan, New York, Vermont and Wisconsin. For more information, please visit our website at www.wageworks.com. Contact Us Want more information about WageWorks Flexible Spending Accounts? GIVE US A CALL: 1.800.800.0133 OR CHECK OUT OUR WEBSITE: www.pbs.us.com Page 5