| When it comes to dollar amounts having anything to | | | | Don't call it a High Deductible plan! Perhaps something |
| do with spending, Americans firmly believe that lower | | | | like "Maximum Benefit Tax Advantaged Health Plan". |
| is better, higher is worse. In the year and a half since | | | | MBTAHP doesn't exactly roll off the tongue though. If |
| the new IRS acronym HSA emerged on the scene, | | | | you have a creative writer around, you may be able to |
| many American businesses are finding difficulty dealing | | | | work on some new words that communicate value |
| with employees that have that common belief. | | | | and savings rather than high deductible payments. |
| To refresh your memory, Health Savings Accounts | | | | Elect, as many companies have, to take the middle of |
| (and the tax deductions and tax free reimbursements | | | | the road option that insurance companies, if pressed, |
| that go with them) require as a prerequisite a "High | | | | will provide-a dual coverage plan. The employee has |
| Deductible Health Plan". Notice that a HDHP starts with | | | | the option of picking the HDHP or the traditional lower |
| "High" and you might have an insight into the problem | | | | deductible plan all within one overall plan with the |
| businesses are facing. | | | | insurance company. Plans with as few as 4 or so |
| Not surprisingly, a HDHP is one that includes a high | | | | employees can adopt this option. Naturally, the |
| deductible which means that you have to spend a | | | | employees taking the higher cost plan have to pay all |
| higher amount before you get any reimbursement or | | | | or a portion of the higher cost or no one will choose |
| insurance benefits. The IRS provides individuals | | | | the HDHP. You may want to give the employee a |
| covered by a HDHP the opportunity to make tax | | | | cash incentive to join the plan and an opportunity to |
| deductible contributions to their HSA and take funds | | | | elect the lower cost plan. |
| out of their HSA to reimburse health care expenses | | | | Give the employee an incentive to contribute to the |
| tax free. Unlike most tax deferred plans such as IRAs | | | | HSA by making company contributions to the |
| and retirement plans, the HSA provides both a | | | | employee's individual plan. Any employer contribution |
| deduction going in and tax free distributions when you | | | | should be accompanied by an education program to |
| take it out. | | | | help them take the best advantage of the HSA. |
| Many individuals, a significant number of whom were | | | | Another less financially attractive option is to offer |
| previously uninsured, have purchased the HDHP type | | | | employees the option of electing the HDHP but include |
| of insurance coverage. They have found that having a | | | | a side plan, called a Health Reimbursement |
| higher deductible means the insurance company is less | | | | Arrangement, or HRA, which will provide company |
| likely to have to make payments on the policy and | | | | reimbursement of a portion of the deductible. The HSA |
| thus the cost is often lower. In many cases, the cost is | | | | must come into effect after the HDHP plan deductible |
| significantly lower. As we know, lower is good. When | | | | is met or it might modify or eliminate the ability to |
| rolled in with the tax advantages of the HSA, the | | | | contribute to the HSA. It could ease some employee |
| individual often finds that the plan pays for itself over a | | | | worries regarding the potential cost of the new plan, |
| few short years. The amount in the HSA can be | | | | particularly during the first years of the plan. |
| invested for long term growth providing a medical cost | | | | None of these options are guaranteed to win over the |
| nest egg for retirement years when income is limited. | | | | employees to the long term advantages of the HSA. |
| The HDHP may be great for a person who has to | | | | Given recent rises in health insurance costs, employers |
| write a check monthly for health insurance; however | | | | are finding it ever more difficult to provide the |
| the story is a little different when a company proposes | | | | coverage they have in the past. The HSA/HDHP |
| a new HDHP. The individual employee hears the higher | | | | combination gives the employee an incentive to be |
| but doesn't see or particularly care about the lower | | | | careful about health care spending plus a powerful |
| premium cost. The majority of that premium savings | | | | long term tax free growth investment account that |
| does not directly benefit the employee's pocket. | | | | can help them pay expenses now and in retirement. |
| The employer's reading along right now will be thinking | | | | Wisely invested, the HSA can grow significantly to |
| that the employee should realize that the savings do | | | | provide retired individuals valuable help with medical |
| impact the employer's ability to pay the employee | | | | expenses on a tax free basis in the future. |
| anything and even stay in business. Even though they | | | | HSA investments are governed by the same rules as |
| should and probably do, realize it is hard to expect | | | | IRAs, including the ability to be self directed into |
| them to give up something for what appears, in the | | | | nontraditional investments such as real estate. Your |
| short term at least, as nothing much. | | | | Entrust office will be able to help you understand the |
| What approach should an employer take when | | | | investment options with a self directed HSA. |
| offering a HDHP/HSA plan to reluctant employees? | | | | |