Health Savings Account Blog

Benefits to Employers

Whether you are the owner of a small or large business, the benefits are the same. HSAs work with a high deductible health insurance plan to:

Reduce your health care benefit costs

By offering an HDHP your premium costs may be 30 to 40 percent less than traditional health plans.

Control medical costs

You can make contributions to an employee’s HSA up to the annual limit - the lesser of the plan deductible or $2,700 for single coverage and $5,450 for family coverage.

Reduce taxes

Your contributions are excluded from your employee’s adjusted gross income and can be deducted as a business expense.

Trim administrative work

Following enrollment in an HSA, the custodian takes over record-keeping including IRS reporting and regulatory reviews, freeing up your staff for other tasks.

For a small business, a HDHP bundled with an HSA may be the difference between offering your employees health benefits or none at all.

Benefits to Employees

Your employees will see an equal, if not greater benefit in an HSA including:

Reduced insurance premiums: Insurance premiums are usually lowered 30 to 40 percent. Employees can use these savings to fund their HSA.

Tax benefits: Similar to an IRA/401k, contributions to an HSA are excluded from an employee’s gross income and grow tax-deferred. Withdrawals used for qualified medical expenses are tax free.

Portability: Employees own and manage their accounts and can take the funds with them should they leave your employment.

Flexibility: Unlike flexible spending arrangements, there are no "use it or lose it rules." Employees can save unused funds for use in later years.

Greater control over health care: Employees will take an active decision making role in their health care. They will be empowered to select a provider based on price and quality. Funds may be withdrawn from their account to pay for deductibles, co-insurance, dental and vision care, and other items including long term care (LTC) insurance.

Opportunity to supplement retirement income and save for medical expenses: Since the money in an HSA grows tax deferred, employees will have another opportunity to invest their funds to maximize their earning power. Once they are 65, they can withdraw funds for any non-medical purposes at ordinary income tax rates in addition to still being able to withdraw tax-free amounts for qualified medical expenses.

Next Steps: Employer Considerations

Overall, HSAs present new opportunities for employers interested in pursuing consumer-directed health plans. But the greatest hurdle will be a well-designed plan and educating your employees on the benefits.

A financial professional can help you develop a strategy to help increase enrollment rates. The biggest driver of HDHP/HSA adoption by employees is an employee match or contribution. Roughly one-third of employers who contribute to employee HSAs offer between $250 and $499, according to a survey by the Council of Insurance Agents & Brokers, with 18 percent offering $500 to $749 and 17 percent contributing $750 to $1,000.

Work with a financial professional on contribution amounts from flat dollars or percentages to a tiered approach who can also provide guidance on how to amend your 125 Cafeteria Plan to allow for pre-tax contributions. Employer contributions are subject to nondiscrimination requirements. In general, you must make comparable contributions for all employees in each coverage category (single coverage or family coverage).

While HSAs provide the opportunity to address the underlying problem of the affordability of health care coverage, the most significant difference in employee satisfaction will be to communicate the health benefits and encourage employees to take more control over their own health. You should select a custodian for your HSAs that provides strong communication programs and decision support tools.

Employees are given greater control at each stage of health care decision-making. That requires detailed information from the cost of health plans to information on health care providers to programs that track their medications and provide them with lifestyle and behavior choices that could impact their short- and long-term health.

While implementation and adoption of a new health care program is no small task, studies have shown that the level of employer commitment to promote healthy behavior and responsible financial management has a direct effect on the behavior of plan participants and how much money is saved in the HSA. Ultimately, employers will get out as much as they put in.

To learn more about HSAs, contact your business advisor or visit http://www.health--savings--accounts.com