1. HSA-Compatible Health Plans Cost Less.
As an employer, you already know about ever-increasing healthcare premiums. According to the Employee Benefits Research Institute, the cost of providing health benefits doubled between 2000 and 2007, while workers’ wages and overall inflation increased only 25 and 21 percent, respectively.
In this environment of spiraling costs, High Deductible Health Plans (HDHPs) offer employers a reprieve. HDHPs can be purchased at a fraction of the rate of traditional health plans. If some of these savings are transferred to employees in the form of contributions to employees’ HSAs, you are ultimately offering your workforce a richer benefits package.
2. HSAs Can Create a Healthier, More Healthcare Savvy Workplace Population.
HDHPs cost less, not only because of their higher deductible (hence lower premiums), but also because HDHPs and HSAs tend to change employee behaviors. According to a recent study conducted by the management consultancy McKinsey & Company, employees with an HSA were more value-conscious and attentive to wellness and prevention. The study found that employees with an HSA plan were:
- 50% more likely to ask about costs
- 30% more likely to get an annual exam
- 25% more likely to engage in healthy behaviors
- 20% more likely to comply with treatment regimens and
- Three times more likely to choose a less expensive healthcare option.
3. You Can Expect Lower Administrative Overhead Relative to Other Health Spending Accounts.
Unlike the Flexible Spending Accounts (FSAs) and Health Reimbursement Accounts (HRAs) of many employee benefits plans, an HSA plan does not hold the employer responsible for administering the HSA funds or ensuring those are used for eligible expenses. Employers often choose to contribute to employees’ HSAs; but otherwise they are not responsible for managing the contributed funds.
4. HSAs Provide an Additional Opportunity For Fmployers to Help Their Employees Save For Retirement.
A significant portion of employees’ expenses in retirement will be medical expenses, and most employees do not save enough for retirement. Providing employees an HSA gives them a very powerful tool to save for medical expenses in retirement. Contributions to an HSA, and the interest earned on those contributions, are tax-free—both when the income is earned and when the money is spent, as long as it is used for “qualified medical expenses."
Once an individual turns 65, he or she may also use the HSA account for non-medical expenses and “ineligible” medical expenses, such as the purchase of a “Medigap” policy or Medicare supplemental insurance. In all such instances, the funds withdrawn are taxable as income, but not subject to any other tax penalty.
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Call the Member Solutions Center at 518-452-8183 or 800-727-3328.