According to survey results published earlier this month by Benefitfocus, a benefits management company, only 13 percent of midsize employers (companies between 100 and 999 workers) offer high-deductible health plans to their employees. However, the survey also indicated that when given a choice between a traditional health plan and an HDHP, 34 percent of employees preferred an HDHP.
This divergence in employer-provided health plans and employee preferences provides an excellent opportunity for employers to reevaluate their insurance options. A benefit for providing HDHPs to employees is that HDHP monthly premiums remain affordable while deductibles across all other health plans are rising. Additionally, the renewal costs for HDHPs are much cheaper than an HMO or PPO.
Another major benefit of employers providing employees with HDHPs is that these plans can be paired with a Health Savings Account
, or an HSA. An HSA is a type of tax-advantaged account that can help employees chisel away at out-of-pocket medical expenses that aren’t covered by the deductible. Unlike Flex Savings Accounts, which can also be paired with an HDHP, Health Savings Accounts do not operate on a use-it-or-lose-it basis. This means that even when account holders change employers, their HSA savings can remain intact.
Employers, employees, self-employed people, and their families all feel the pull of rising health care costs. Pairing an HDHP with an HSA has allowed a growing number of families to manage their rising health care costs. Below are 10 reasons for employees and employers to consider an HSA:
1. HSA premiums are vastly cheaper than other healthcare plans.
In order to use an HSA, you must be part of a High Deductible Health Plan (HDHP). Though the deductible is high, your premiums are low and you are still covered for catastrophic medical events. As was stated above, the renewal costs are also much cheaper than an HMO, PPO, or other types of health plans.
2. HSA will cover peripheral medical costs.
Dental care, eye glasses, and eye surgery are typically not covered with many HMOs or PPOs. HSAs can be used for these types of expenses, in addition to acupuncture, psychiatric treatment, fertility treatment, and other alternative medicines. See IRS Publication 502
for the full list of covered expenses.
3. You control your medical care with an HSA.
With an HSA, there is no network. Account holders are not forced to choose from a list of doctors or hospitals. HSA account holders play an active role in every healthcare decision.
4. HSAs are tax-deductible.
The money that you deposit into your HSA is tax-deferred. Even if you spend the entire account savings on approved medical expenses, the money is still deductible.
5. Money saved in an HSA never expires.
As mentioned above, unlike a Flex Spending Account, the money in your HSA can grow for years until you need it; regardless of employer. You can pay for medical expenses out of pocket, save the receipts, and then reimburse yourself for those qualified medical expenses any time in the future with HSA funds.
6. HSAs can be filled from an IRA.
You can pay for your health care from your retirement account one time throughout the life of the account. If you’re short on cash, you can take a bit from your retirement and transfer to your HSA without a penalty.
7. With a self-directed HSA, your health care dollars can be an investment.
Your HSA money can join with your self-directed retirement funds and invest in real estate,
gold, private stock, or a loan.
8. HSA investment earnings are tax-deferred.
If you happen to make a lucrative investment and earn thousands, the money will stay in your HSA until you need it, tax-deferred.
9. HSA money earns interest when you’re not using it.
If you have trouble securing a profitable investment, or if you are between investments, the money in your HSA still earns tax-deferred interest.
10. Contrary to popular belief, health care costs are not tax deductible for most Americans.
Healthcare costs must be 7.5% of your income to be tax-deductible. Most Americans do not qualify for this, even during a year when they spend a lot of money on health care costs.
Whether you're an employee, an employer, or you're self-employed, education
about Health Savings Account is an important step in discovering the best health care option for you or your employees. Call or email New Direction IRA today to learn more, and as always, happy investing!