By Richard Argentieri, Senior Vice President of Sales | Independent Health
More than ever before, employers are putting their employees in greater control of their own health by offering high-deductible health plans (HDHP). According to the National Center for Health Statistics (NCHS), 43.4% of persons under age 65 with private health insurance were enrolled in an HDHP in 2017 – an increase of 18.4% from 2010.
These plans offer lower premiums because employees take on more of the up-front cost of medical care. But, the amount of the up-front deductibles can cause employers and their employees to hesitate from moving to these types of plans. HDHPs deductible amounts are at least $1,350 for individual or $2,700 for family coverage.
Fortunately, an HDHP that meets certain criteria may be paired with a Health Savings Account (HSA) to help employees cover the cost of the deductibles. These types of plans are known as HSA-qualified HDHPs.
An HSA lets employees contribute money to their account pre-tax and pay for eligible health care expenses from their account. There are other advantages to HSAs, not only for employees, but for employers as well.
- Easy to administer – HSAs free up the employer from the burden of administration that may exist with other types of employee tax-advantaged accounts, such as FSAs and HRAs.
- Tax savings – Employers can save when their employees participate in HSAs because an employer’s contributions to their employees’ account are tax deductible. Employee contributions are also exempt from income tax, so their contributions won’t count against employers’ FICA taxes. HSAs have the benefit of purchasing power. When you look at the taxes that employers save – for example state, federal and FICA taxes – for every dollar the employee receives in an HSA, compared to the health insurance benefit, it will give the employees 30 to 40 percent more purchasing power.
- Enhancement to employee benefits – While employers do not have to make any contributions to their employees’ HSAs, many employers find that making a contribution helps to improve HDHP adoption rate and boost participation in HSAs, especially if they are transitioning from a more traditional type of health coverage. Employers of all sizes can offer HSAs in conjunction with HSA-qualified health plans and provide attractive benefits to prospective employees. When you combine the unique features of the HSA, it’s a unique instrument for employers to offer a more competitive benefit package.
- Paying health care expenses – An HSA is a savings tool that empowers the account holders (employees) to plan for future health care expenses. Employees’ contributions, withdrawals for eligible expenses and earnings are all tax-free. Plus, unspent HSA funds roll over year to year. As a result, employees can build funds to cover any eligible expenses they incur until reaching their deductible. Once a high deductible health plan member reaches the deductible, the services are covered by coinsurance or co-payments. However, virtually all high deductible health plans cover preventive services in full even if the member hasn’t met the deductible, so the HSA funds are used for all other services.
- Long-term savings – Another way to use HSAs is for long-term or retirement investment. Despite the term “savings” in its name, most HSA account holders view them as “health spending accounts,” and use the funds for current medical and health expenses. However, there is a growing recognition that HSAs can be used as a long-term savings account. An HSA is a powerful tool that can come in handy now and in the future. A study by the Employee Benefits Research Institute found that the average couple needs about $265,000 in retirement for health care expenses alone.
- Ownership – The employee fully owns all contributions to the account as soon as they are deposited. Account holders are responsible for making sure they use the account funds properly and have to provide supporting evidence on the use of their funds if requested under IRS audit. With enrollment growth in HSA-qualified plans expected to continue in the coming years, HSAs represent a vital option to provide Americans with greater control and choice over their health and financial security, leading to greater peace of mind.
Independent Health offers integrated HSA solutions
At Independent Health, we’ve seen many employers move to higher deductible plans in recent years. In fact, nearly 25,000 of our members are currently enrolled in HSA-qualified HDHPs. That’s why we recently announced a new partnership with HealthEquity, one of the leading administrators of HSAs in the nation. Through this collaboration, Independent Health is the only health plan in Western New York that offers an HSA product with complete integrated enrollment and claims payment solutions that makes it easier for employers and members to manage, use and maximize an HSA. To learn more about Independent Health’s HSA-qualified High Deductible Health Plans, visit independenthealth.com.
About The Author
As senior vice president of sales at Independent Health, Richard Argentieri is currently responsible for developing and successfully implementing sales strategies to retain and grow membership in the small and large group commercial health insurance market for both fully insured and self-funded segments. He was originally hired by Independent Health in 2003 to oversee the initiation, development and successful execution of sales, marketing and operations strategies for the company’s IRS-qualified reimbursement account products and services, including flexible spending accounts (FSA) and health reimbursement accounts (HRA). Argentieri earned his bachelor’s degree in marketing and management from Canisius College.