Controlling Health Insurance Costs - Overview
Posted by Russ Swallow on Mon, Jun 23, 2008 @ 05:02 AM
Controlling health insurance costs is not rocket science. If you want to lower your health insurance costs, just increase your deductible. If you increase it enough, you could have a qualified High Deductible Health Insurance Plan (HDHP).
"Qualified" means it meets the federal guidelines to offer Health Savings Accounts (HSAs) wherein employees may set aside money on a tax-free basis to pay for their medical expenses when and if they occur.
The money in the HSA continues to grow tax-free and could be used for post retirement medical expenses which tend to be quite high. As long as the money is used to pay for qualified medical expenses, now or in the future, no taxes will ever have to be paid.
HSAs for Businesses
Health Savings Accounts (HSAs) have become the fastest-growing product in the health benefits industry for good reasons. High Deductible Health Plans dramatically lower health insurance costs for employers while employee-owned accounts provide control and freedom for routine health expenses.
Here's how to maximize participation and minimize confusion:
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Contribute to the HSA
It is imperative that you contribute money to your employees' HSAs. Whether you are replacing an existing plan with a high-deductible one or are giving your workers a health plan for the first time, contributing to their HSAs is necessary to address the deductible risk they now face.
Rollover Education
There have been a number of new laws that help employees to jump-start their HSAs. If your company or employees used to have a Flexible Spending Account (FSA) or Health Reimburse- ment Arrangement (HRA), both of which will be discussed in a future blog or blogs, they can make a one-time transfer of those balances into an HSA. Additionally, employees can now also make one-time transfers from IRAs into their HSA.
Flexible Spending Accounts (FSAs) Aren't Necessary
Don't worry about not having a pre-tax cafeteria plan (FSA) in place. If your employees don't get their HSA contributions on a pre-tax basis via payroll deduction, they can take it as a tax deduction on their tax returns at the end of the year.
Consider Complete Employee Control
For employers wishing to utterly simplify health insurance, an increasingly popular approach is to provide employees with a fixed dollar amount per month for buying health insurance and making HSA contributions. This requires minimal administration as employees choose a plan on their own. This approach, known as defined contribution, maximizes employee control and provides significant employer savings. |
Why don't more companies use HSAs?
While businesses face increasing health insurance costs, they haven't developed a strategy to control those costs. And, while they've heard about HSAs, they haven't found a "soft" way to get their employees to "buy in" to the high deductibles needed to qualify for the HSA.
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| Next Blog: |
Health Insurance Basics "101" |
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