Business owners have a more affordable option for employee health care plans. Pairing a high deductible health care plan (HDHP) with a Health Savings Account (HSA) can be the answer for both businesses and the staff they want to attract and retain in this economy.

As the workforce becomes increasingly budget-focused, businesses are also cognizant of employee expectations for some level of health care coverage. Raises may be minimal in 2010, but employees still expect a health care benefit package.

Health insurance is so expensive that a traditional PPO plan may not be affordable anymore by the business or its individual employees because of recent hikes in premiums. An HDHP offers an option of a higher deductible for lower premium so employees can still have coverage. Pairing it with an HSA has the added benefit of helping employees save money to pay for the deductible and medical expenses — tax-free.

The deductible may be higher than a typical health care plan; however, after that amount is reached, the coverage is often 100 percent. Many HDHPs still cover preventative care prior to the deductible being reached, like a woman’s annual Pap test and mammogram. Meanwhile, the employee is contributing non-taxable savings to an HSA to cover medical costs.

With a high deductible plan, the out-of-pocket costs are initially higher. However, you pay for what you use. It avoids the pitfall of paying a high premium for coverage not used.

How it works and who qualifies
In this economy, consumers are looking for any possible way to save money and take charge of their savings and future.

Saving money tax-free is a major benefit to an HSA. There is no “use it or lose it” rule, unlike Flexible Spending Accounts (FSAs) — an HSA rolls over year-to-year with qualified withdrawals being tax-free, as are contributions and earned interest.

There is no tax to withdraw HSA funds for qualified medical expenses and it is deposited pre-tax if your company will withhold pre-tax, or you can make a deposit with after tax dollars and can write it off on your taxes at year’s end to attain that benefit.

Typically, someone not considered a dependent with a qualified high deductible plan not enrolled in Medicare will qualify to open an HSA account. Though a high deductible plan typically doesn’t cover dental/vision (only medical costs), those costs can be claimed against an HSA.

Because the cost of health care is rising, it’s common for companies to have high deductibles now, so an HSA is a way to make up the difference via tax-free savings. Since it pairs with a high deductible insurance plan, it’s a great way to lower health care costs and give employees flexibility and control.

Navigating an account might seem complex, but it’s really not. At M&I Bank, for example, there is education available about benefits 24/7 via a toll-free customer service line dedicated to HSA-related questions. Some banks offer special pricing that enables HSA customers to waive fees based on other accounts/services they have with that bank.

These accounts have an investment option as well, so if an employee has a larger amount, he can elect to put the money into a mutual fund or other investment in order to earn more money. At M&I Bank, a professionally managed, choice list of mutual funds is designed especially for those looking for a long-term savings vehicle.

At the age of 65, funds remaining in an HSA can continue to be used for medical expenses. The account owner may also use these funds to supplement retirement income, without incurring a penalty from the IRS. This account could be used potentially as a retirement vehicle for those who are funding the account and not using the funds from year to year.

How to get started and comparison shop
During open enrollment, a business can talk with its insurance agent about how its plan might work in tandem with an HSA. A dual option can be offered: both a traditional health care plan (like a PPO) and an HDHP, or just a high deductible health care plan. The option of an HDHP plan is dependent upon other factors, like number of employees and can be discussed with an insurance provider to see if it’s an advantageous option for a business to pursue.

A bank can then partner with the HDHP insurance provider to offer an HSA. All HSA providers are not created equal. An HR director should look at key variables when comparing providers. There can be hidden variables like:
• Monthly service fees
• Start up and close out fees
• Local accessibility
• Online banking availability

Explore the method of money disbursement — how does the money get from payroll to the bank? Can it be done through payroll deduction? Payroll integration is important as a seamless funding solution. What about local service at the bank — is it available? Some “local providers” offer it, but their bank customers then have to mail claims out-of-state instead of visiting their local branch. Are funds FDIC insured?

Once an insurance plan is selected, an agent can typically recommend an HSA partner, or an HR administrator can comparison shop on his own.

There is a wide range of pre-enrollment communications and early education materials, like posters, payroll stuffers, internal emails, announcement letters, enrollment meetings, etc.

Future of health care
An HSA has the added benefit of encouraging employee education about medical pricing — they learn to ask their doctor for a generic or cheaper option for prescriptions, and are less likely to seek expensive ER services, for example. Because employees are paying for services rather than a set co-pay, they learn to be better health care consumers, which ultimately can keep rates down year-to-year. Consumer-driven health plans gives more control back to the consumer.

HSAs offer security, affordability, flexibility, control, savings, portability, ownership … and, of course, tax-free savings. This e-mail message and all attachments transmitted with it may contain legally privileged and/or confidential information intended solely for the use of the addressee(s). If the reader of this message is not the intended recipient, you are hereby notified that any reading, dissemination, distribution, copying, forwarding or other use of this message or its attachments is strictly prohibited. If you have received this message in error, please notify the sender immediately and delete this message and all copies and backups thereof. Thank you.