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Employers Keep Adopting Health Savings Account Options…So What Are They and Why Are They Using These Plans?
Health Savings Accounts (HSAs) were created in 2003 so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses. Generally, an adult who is covered by a high-deductible health plan (and has no other first-dollar coverage) may establish an HSA.
According to the Kaiser Family Foundation, premiums for family coverage have increased 20% since 2011 and 58% since 2006. With health insurance costs consistently increasing, employers have searched for ways to control their costs.
Average premiums for high deductible health plans are generally significantly lower than other plans.
Employers and employees are moving increasingly to offering high deductible health plan with HSA option to their employees. Twenty-nine percent of covered workers are enrolled in a high deductible plan with savings option. Over the past two years, enrollment in PPO plans has fallen 10 percent while enrollment in HDHP plans has increased 8 percent.
Certain qualified high deductible health plans work in conjunction with an HSA and can be advantageous to employers and employees.
For employers, these plans reduce health care premiums and place more emphasis on the employees being better consumers of healthcare. For employees, these lower cost plans also reduce their deductions for health care while also providing them the ability to contribute money into a tax favored health savings account.
Your HSA dollars can then be used to help pay for the health insurance deductible and qualified medical expenses, including those not covered by the health insurance, like dental and vision care.
HSAs can offer a great long term solution to control cost for employers and employees. While there is a max amount that can be contributed toward an HSA annually, those funds can be carried over year after year.
HSA-based strategy can help both employers and employees stretch their health care budgets by pairing tax benefits on savings with lower premiums on insurance coverage. Moreover, HSAs offer employees an opportunity to grow their health care savings over time — a valuable benefit that can help businesses become employers of choice.
Employers can contribute to employee HSAs to help them get started and can be a great incentive to get employees to contribute. Educating employees on these types of plan is paramount. Employees must understand how these plans function and how to best utilize their HSAs for their specific medical needs.