A trend in group health insurance that’s gained leaping
popularity in the last several years are Health Savings Account (HSA) plans or
high deductible health plans (HDHP).
This article will give you a foundation for understanding HDHP’s with
HSA’s and arm you with the facts to determine if this type of group health
insurance plan is right for your organization.
So, how exactly does a HDHP with an HSA work? In this type of plan, employees typically
have a large deductible, often more than twice the amount in deductible of a
traditional PPO plan. In a HDHP,
monthly premiums are typically less than in traditional plans where there is a
co-pay (sometimes substantial). The
lower premium saves both the employee and company money on premiums. However, an employee is required to then pay
out of pocket for medical services and prescriptions in full until they reach
their full deductible amount. However,
any funds paid toward medical care or prescriptions should be paid out of the
Health Savings Account that is set up in accordance with the HDHP. HSA accounts typically assign account holders
a credit/debit card that employees should use for any medical related expenses. On an HSA account, medical services can
typically be purchased tax free.
So you may ask how the account is funded and how can the
purchases be tax free? Well, an employer
typically makes a contribution to the HSA account on behalf of the
employee. The amount typically ranges
from 6 to 20% of the deductible, but is up to the employer’s discretion. Employees will typically contribute to their
HSA’s as well by payroll deduction. If employees
know they have an expensive medical event, they can increase their
contributions to cover the costs.
Additionally, if an expensive emergency happens, an employee can
reimburse themselves from their HSA account to cover the costs with the tax
benefits.
A HDHP with an HSA is uncomfortable for some individuals to
switch to, especially if they are used to having something like a $20 co-pay
for their doctor visits. This type of
health plan requires employees to spend their health care dollars more wisely
and to become educated health care consumers (if they want to avoid high
costs). You can think of a HDHP more
like car insurance. It’s there to help
you in the event of an emergency, but is not meant for you to be dependent on
it for things like oil changes or routine maintenance. Some organizations who have this type of plan
offer services through their HR department to help employees find the most cost
effective services for certain procedures.
However, if you are willing to promote a culture of wellness and educate
your employees on spending their health care dollars wisely, this type of plan
could be cost saving and good fit for your business.
