Related: 3 steps to ensuring a successful open enrollment during a pandemic

Health plans in particular are undergoing a revolution as new employee-centric health plans emerge to challenge traditional group health plans. Conventional plans rely on employers to pay premiums regardless of whether workers actually receive medical care or not. The model has been proven to be inefficient at best and imposes excessive costs on businesses. Health Reimbursement Arrangements (HRA), Health Savings Accounts (HSA), and Flex Savings Accounts (FSA) have emerged to provide employees with greater control over their healthcare while offering significant tax advantages.

HRAs offer self-funded health plan option

HRAs are an IRS-approved, employer-funded, tax-advantaged health benefit used to reimburse employees for out-of-pocket medical expenses and personal health insurance premiums. Rather than providing traditional coverage, businesses offer employees a monthly allowance of tax-free money. Workers can use this money to buy the qualified health care services they want, potentially including health insurance, and are reimbursed by their employer up to their allowance amount.

Through HRAs, employers reimburse employees directly only after the employees incur approved medical expenses. Employees can use these plans to buy their own comprehensive individual health insurance with pretax dollars either on or off the Affordable Care Act's health insurance marketplace. Individual coverage HRAs can also reimburse employees for qualified health and dental expenses such as copayments and deductibles.

HSAs and FSAs: Key similarities and differences

HSAs and FSAs are health options that sound alike but have key differences. An HSA is a special type of tax-advantaged savings account that lets employees put aside pretax money to pay for qualified medical expenses tax-free, now or in the future. The plans are triple tax-advantaged and only available to those who are covered under an HSA-eligible high-deductible health plan (HDHP). By allowing people to save pretax funds for qualified medical expenses, HSAs let workers retain more of their paychecks while also lowering your overall healthcare costs.

FSAs are a special tax-advantaged account available to those who can receive health insurance coverage through their employer. The accounts can be funded with pretax dollars and then used to pay for certain out-of-pocket healthcare costs. FSAs can only be used by employees working for a company that already offers healthcare coverage which limits its availability to the workforce. Small business owners and those who are self-employed can also utilize HSAs, provided they are covered by a qualified high-deductible health plan (HDHP).

Distributions, withdrawals and accessibility are additional points of differentiation between HSAs and FSAs. HSAs offer more flexibility in terms of distributions and withdrawals, even allowing them for nonqualified expenses (though they do withhold tax and include a penalty when used for ineligible expenses). With FSAs, distributions and withdrawals are only allowed for specific health care expenses and employees must submit an invoice to their employer for payment for each expense.

HSAs and FSAs also differ in terms of account ownership and portability. With an HSA, employees own the account from day one and maintain control even if they leave their job, change healthcare plans or retire. In fact, retirees can use their HSA funds for nonmedical expenses with no penalty. With an FSA, the employer owns the account so it will be forfeited when the employee leaves. These are the types of considerations that must not only be accounted for when deciding whether to offer them to employees, but also clearly communicated when they are selected.

Communicate health plan tax implications and benefits

It is critical that HR and benefits professionals clearly communicate the implications of selecting specific health plans, particularly for non-traditional options. Employees must understand the impact of any healthcare option on their paycheck, coverage, and tax implications. HRAs, HSAs, and FSAs are intimidating to many employees, especially those from older demographics who've been embedded in the concept of traditional health insurance coverage for their entire working life.

On top of that, many employees simply don't know how these options can greatly benefit the quality of the healthcare they receive so they automatically bypass the option during open enrollment. Employers must go to great lengths to help employees fully understand the benefits of all their health plans. Basic side-by-side comparisons make it easy for employees to evaluate one option against the next—like an HDHP/HSA option against a traditional health insurance plan.

Smart employers communicate early and through multiple channels with their employees about open enrollment and the options available. People prioritize communications channels differently based on their own preferences so it's critical that businesses communicate their open enrollment information through multiple channels to meet the needs of all your employees, including printed materials, digital resources, emails, social media posts, videos, group meetings, and webcasts.

When it comes to effective communication, there's no one-size-fits-all solution, so you need to be sure you cover all the channels that make sense for your employees.

Tom Torre is CEO of Bend, which specializes in providing health savings accounts for individuals, employers and partners.

Read more: 

• 8 tips for building a virtual open enrollment strategy
• Employers re-examining benefits when planning for post-pandemic realities
• Infographic: Pandemic has employees rethinking the value of benefits