Three Advantages of HSAs Your Employees Need to Know

With an eye toward open enrollment and a shift toward high deductible health plans, employers need to provide a health savings account option with their benefit offerings for 2017. Hopefully employees are expecting it. According to the National Business Group on Health, 72% of large employers offered them in 2016, up from 40% in 2010.

Health savings accounts allow employees to pay healthcare expenses with pretax dollars and helps employers ease the transition to HDHPs, which facilitate medical cost containment for the whole company.

But for employees to choose a HDHP with a HSA, they need to understand how they really work and the benefits of this type of plan. Consider communication in as many forms as possible, as early as possible that specifically address HDHPs in conjunction with HSAs. And make sure to hit upon these key points:

Emphasize Tax Advantages

Explain with examples, the triple tax advantages of HSAs. Employees must clearly see how they add money on a pretax basis — that the money grows tax-free — and when it’s withdrawn for qualifying expenses is tax-free. Also, if your company HSA administrator offers investment options, be sure to present all the options. Employees who can make maximum yearly contributions and use other money to pay for current healthcare expenses need to know that money in their HSA can be used for Medicare Part B, Part D and Medicare Advantage premiums (when the time comes) tax-free.

They Do Have Flexibility

Demonstrate a HSA’s flexibility. If employees are familiar with or have an IRA, a HSA works in similar fashion allowing them to make contributions until April 15 of the following year. This means employees that keep contributing also keep trimming their taxable income. There is no use-it-or-lose-it rule. Employees can keep putting money away (up to the allowable annual maximum) until they need it. They can also reimburse themselves retroactively for past medical expenses if they’ve kept the receipts and their account was open.

They’re Not Just For The Really Healthy

Health Savings Accounts can work to the advantage of the young and healthy and also someone with a chronic condition. Help employees do the math. They can compare plans by weighing the worst case scenarios—have them add the yearly premium of a traditional plan to the out-of-pocket maximum and then do the same for a HDHP. Because HDHPs are often a couple thousand less in yearly premiums than traditional plans and cap liabilities, they can potentially save employees money. Plus, if you’re one of the many employers that kick in to employee HSAs too, which according to a 2015 Employee Benefit Research Institute Brief was an average of $1,021 that extra money should be added into the equation as well.

Source:  Money. 5 Things to Know About HSAs Now. September 2016. P27