Why Now Might be a Good Time to Consider a High-Deductible Health Plan
With healthcare reform currently in flux, many business owners may find themselves trying to grapple with the best way to continue providing their employees with competitive benefits. While TriNet can help individual businesses design a benefits strategy that works for their industry, location and size, now may also be a good time for businesses across the country to take a closer look at high-deductible health plans (HDHPs).
The cost of HDHPs
HDHPs are commonly used as one way to provide additional cost options for coverage. An HDHP, as the name implies, has a higher deductible than traditional insurance plans. The monthly premium, therefore, is typically lower than other types of coverage. Members of HDHPs must meet the deductible before the plan will pay anything toward the cost of services, with the exception being preventive care.
HDHPs and health savings accounts
To lessen the potential financial burden in the event of an illness, employees enrolled in qualified HDHPs can open and contribute to a health savings account (HSA). HSAs allow HDHP plan members to set aside money, tax free, that they can use toward the cost of eligible expenses that the HDHP will not cover until the member reaches the high deductible. An HSA differs from a health care flexible spending account (FSA) in that the money is always available for eligible expenses, for the life of the account holder, even when they are no longer enrolled in an HDHP. Also, there is no annual “use it or lose it” rule associated with an HSA the way there is with a health care FSA.
Which employees are most likely to benefit?
A 2016 survey by health insurance advocacy group America’s Health Insurance Plans (AHIP) reported that the highest demographic by age to be enrolled in an HSA and HDHP were between the ages of 45-64. One benefit of HSAs to this group is that the money in these accounts is available, tax free, to plan participants long after they retire. The HSA can be a way to stretch healthcare dollars after retirement when income is typically more limited and healthcare expenses may increase.
Additionally, a report on health benefits at midsize employers found that 40% of millennials over age 26 are most likely to opt-in for an HDHP when given a choice. Like the baby boomer generation mentioned above, millennials may be choosing an HDHP with an accompanying HSA as a means to save money—but for a different reason. Monthly premiums for HDHPs tend to be significantly lower than other traditional insurance plans. And since this demographic tends to be relatively healthy, they may be less inclined to pay higher premiums for coverage they are not as likely to use.
HDHPs and your business
Here are some tips on how to help employees consider electing an HDHP and contributing to an HSA.
- HSA education: Expounding the virtues of tax-free HSA contributions is a great selling feature for HDHPs. Also, the HSA follows them anywhere, from job to job and into retirement. Many HSA providers allow multiple investment options after the account balance reaches a certain threshold, potentially providing higher returns on the HSA balance.
- Voluntary benefits: Critical Illness insurance and/or hospital indemnity insurance can be added to an employer’s benefit offerings to offset concerns by employees that they will be overwhelmed with expenses in the event of a catastrophic injury or illness. These voluntary plans tend to be inexpensive and in some cases are portable when an employee changes jobs. Eliminating the fear associated with potentially high medical costs can help to make an HDHP even more appealing.
- Employer contribution: As an employer, you can make contributions to your employees’ HSA accounts, which can be an attractive benefit if you’re looking to recruit top talent. This contribution may also be an incentive for employees to choose these plans.
If you’re interested in learning more about HDHPs and HSAs and how they can benefit your business, contact TriNet.
This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.
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