While employees may see the benefits to the company for movingto an HSA-qualified plan—a lower price point, the flexibility toadjust HSA contributions in future years, and the potential forbetter utilization and reduced claims—many business owners worryworkers won’t see the value in a plan where they’re responsible formost of their up-front expenses. And, as we all know, perception isreality: if employees don’t think they have a good benefits plan,they don’t, regardless what the employer is paying.

So how can employers ensure that their employees will appreciatetheir benefits even after they drop the copays from the plan? Theanswer, of course, is education and communication—but what shouldwe be communicating? Sure, it’s important that employees know howto access their benefits and utilize the price and qualitytransparency tools that are available to them, but that alone won’tsell them on the plan.

To really convince employees that this is a good solution forthem and their families, we need to show them how an HSA isactually better than some other health plans and tax-advantagedaccounts they might already be familiar with. Here are a few .

1) Better than an FSA

An FSA, which allows employees to set aside tax-free dollars topay for current-year medical expenses, can be a great option if youknow how much you’re going to spend on health care this year, butit does require you to be a bit of a fortune teller. If you guesstoo low on your medical expenses, you forfeit some of the taxsavings you could have enjoyed. If you guess too high, you actuallylose some of the money you put into your account. And even if yourealize that you messed up, you’re not allowed to change yourcontribution mid-stream.

In many ways, an HSA is actually more flexible than a flexiblespending account. Here are some of the distinctive features:

HSA contributions are not subject to the irrevocable electionrule, so employees are not locked in at their original contributionamount. In fact, employers must allow employees to adjust theircontributions on a monthly basis at a minimum.

HSAs do not have a use-it-or-lose-it rule; instead, it’s ause-it-or-keep-it account. Unused funds roll over from year toyear, so employees can stash away money during the good years anduse it when they do have a big medical expense.

HSAs are also individually owned accounts, so employees take themoney with them when they leave. And, as a bonus for employers,because HSAs are individually owned, the employer is notresponsible for keeping up with expenses—it’s up to the employee tomake sure they’re using their accounts for their intended purposeand keeping copies of the receipts.

2) Better than a 401(k)

The beauty of a 401(k) is that employees can deposit funds intheir account, get an immediate tax break, and watch their moneygrow on a tax-deferred basis, earning investment income along theway. They don’t pay taxes on the money until they actually withdrawit from the account.

An HSA is similar. Employees can deposit funds into theiraccount and earn tax-free interest and investment income year afteryear. But with an HSA, as long as the funds are used for qualifiedmedical expenses, account holders never pay taxes on the money—it’snot a tax-deferred account like an IRA or a 401(k), it’s actually atax-free account.

At some point, most of us will have medical needs that we canpay for with our HSA, and even those who don’t will have plenty ofthings to spend their HSA money on as they grow older – like longterm care insurance and Medicare Part B premiums. And, once someonereaches age 65, they can actually use their account like an IRA ora 401(k). If they withdraw funds for non-qualified expenses,they’ll pay taxes but no penalty, while qualified expenses arealways tax-free.

3) Better than a raise

HSA-qualified plans tend to have a lower price point than atraditional PPO plan, giving an employer the opportunity to sinksome money into their employees’ HSA accounts. There are tworeasons that it makes more sense for an employer to deposit thepremium savings into the employees’ HSAs than to pass on thatsavings in the form of a premium discount or a pay raise.

The first is perception. As Steve Neeleman, founder and CEO ofHealthEquity, explains, “a $50 per month —or $600 per year—HSAcontribution is going to show up every pay period in the employees’accounts and accumulate. All an employee has to do to appreciatethe employer’s ‘gift’ is to log on to their member site and see themonthly contributions. On the other hand, a $50 premiumdiscount—or, in other words, $50 more cash from their employerevery month—will soon be forgotten by the employees because theirpay has been adjusted and it is buried in their EFT to their bankaccount…out of sight, out of mind.”

The other reason an HSA contribution makes sense for both theemployer and the employee is because $50 really means$50.

Neeleman continues, “When an employer puts $50 in an employee’saccount, the entire amount is passed on to the employee. Theemployer does not pay FICA taxes, and the employee receives the $50completely tax-free. But when an employer gives the employee $50more income per month, both the employer and the employee have topay 7.65 percent FICA taxes on that $50 [reduced to 5.65 percentfor employees in 2012]. So it actually costs the employer $53.83 togive the employee $50, and the employee’s fifty bucks quicklybecomes $46.17. Of course, that’s not all the employee has to pay—she also owes federal and state income tax. Using a cumulativefigure of 20 percent (a pretty low tax rate), another $10disappears, leaving the employee with only $36.17 extra per month,probably divided over a couple paychecks.”

No wonder she forgets about it so quickly.

4) Better than a copay plan

The advantage of a traditional PPO plan is that up-frontexpenses like doctor visits and prescriptions are predictablebecause they’re covered by a fixed copayment. Unfortunately, thispredictability is lost for someone with larger expenses that causethem to hit their deductible and “maximum out of pocket.”

That’s because, on most traditional PPO plans, copayments do notcount toward the OOP max—they continue even after the member hasreached her deductible and coinsurance stop-loss amounts, so themember’s total exposure is actually uncapped and unpredictable.

With an HSA-qualified plan, the member pays more up front forroutine expenses like doctor visits and prescriptions, but shestill gets the insurance company discount, and this amount isapplied toward the plan’s deductible and out of pocket maximum.Out-of-pocket max really means out of pocket max on anHSA-qualified plan—the member knows up front what her worst-casescenario is and can plan accordingly.

5) Better not wait…

Many experts expect HSAs to be the plan of the future,especially after the majority of the health reform provisions kickin in 2014. They will likely be the bronze-level “minimum essentialbenefits” plan that individuals must have in order to avoid apenalty, so enrollment should increase even more rapidly than italready is.

But that doesn’t mean we should wait until 2014 to sign up; onthe contrary, if we think we may have an HSA some day, then itmakes a lot of sense to go ahead and get it today, while premiumsare still somewhat manageable and we can afford to sink some moneyin our accounts. If we wait until 2014, premiums will almostcertainly be higher, leaving us less disposable income to set asidefor medical expenses. As with any investment, starting early isalways a good idea.

Eric Johnson is a former columnist for Benefits Sellingand president of ComedyCE.com, a continuing education companywhose mission is to make learning fun. He can be reached at[email protected].