Navigating Benefits

Pairing High-Deductible Plans With Health Savings Accounts: What You Need to Know

  • Health savings accounts (HSAs) allow individuals to save money that can be used to pay medical expenses until the deductible is reached

  • High-deductible health plans (HDHPs) may have a smaller network than low-deductible plans, but offer other benefits

  • Providing education and explaining details about cost savings can help employees decide whether to join an HDHP with an HSA

Posted by March 29, 2019

Pairing high-deductible plans with health savings accounts can be a really smart move for some businesses.

Health savings accounts (HSAs) can help employees set aside the funds needed to cover costs associated with a high-deductible health plan (HDHP). But workers might shy away from HDHPs, assuming it’ll cost them more based on its name alone.

However, that’s not necessarily true. This is why it’s important to break down the differences between low- and high-deductible plans for your colleagues, and explain how HDHPs and HSAs work together. This can enable your organization to give the entire workforce all the information needed to choose a suitable health plan.

How High-Deductible Plans and HSAs Work Together

With an HDHP, your monthly premiums are typically lower because you must meet a higher deductible for all your benefits to kick in. While this is attractive to some employees, it may also seem overwhelming to others. That’s why offering an HSA alongside a high-deductible plan is so crucial.

An HSA can help cover medical expenses until a deductible is reached, and this type of benefit is typically available to anyone who has a qualified high-deductible plan (typically a plan with at least a $1,350 deductible for an individual, or $2,700 for a family). Money put into an HSA can be set aside without counting toward an employee’s income tax—and if it’s used for a qualified medical expense or a deductible, the money remains tax-free.

HSAs have a limit, though. Individuals can contribute up to $3,500 a year (or $7,000 for family coverage, as of 2019), including what their employer contributes. The good news is that HSA contributions roll over from year to year, the interest isn’t taxable and that money is always belongs to the employee, even if they change jobs.

Low-Deductible vs. High-Deductible

The setup of HDHPs can sometimes be a little different from the more traditional low-deductible plans.

For instance, both plans are considered Preferred Provider Organizations (PPOs), which means you can still go to whatever in-network doctor you want and don’t need a referral for an in-network specialist. But other times, the HDHP might be an Exclusive Provider Organization (EPO) instead of a PPO. An EPO typically has a smaller network, but you still don’t need a referral to see a specialist.

It’s important to note that EPOs provide zero coverage for out-of-network doctors, while PPOs typically offer some, albeit limited coverage. These differences can vary from plan to plan, so be sure to talk to your organization’s agent about the specifics.

Another difference between the two options is that an HDHP allows individuals to maintain an HSA, while low-deductible plans do not. HDHPs tend to have lower premiums but much higher deductibles, and sometimes higher out-of-pocket maximums, too. High-deductible plans are usually great for younger employees with few health issues, especially those who don’t want to spend money on health care they won’t use.

Encouraging Colleagues to Sign Up

If your coworkers don’t seem interested in joining an HDHP with an HSA, they may simply be unclear about how it works. The terms themselves may sound complicated and make people nervous! Providing brochures and websites with step-by-step, easy-to-understand explanations can help. So can offering one-on-one meetings with a health care agent or accountant.

People may also be hesitant to sign up because switching health care plans often seems more difficult than it really is. Explaining how easy it is to switch—and how their current plan may no longer suit them—can also help.

Getting an accountant to compare cost savings is vital. Ask them to create a basic example of a low-deductible plan and the yearly costs associated with premiums, taxes on income and health expenses. Then, compare that with the costs of an HDHP with an HSA. For healthy people who don’t need to see a doctor frequently, and don’t need expensive medications, the cost savings could be significant.

All in all, employees tend to be the happiest when given a choice between different plans—and lots of information about each. Check out the Employer Toolkit on United Concordia Dental’s website for more tips around effectively explaining benefit plans to team members.

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