The Truth About Saving Money with a Health Savings Account

by Tino Versoza, GET-Benefits

Abstract:
Next year, SAO members will have an opportunity to take advantage of a new health plan offering, with Health Savings Accounts. Find out what the advantages and disadvantages are in HSAs, and what it may mean to your company. Learn about other employee benefits available to you.

Article:

Health Savings Accounts (HSAs) 101

SAO Members will have access to HSA offerings in 2006. This benefit has been anticipated by many of you for some time. But what are these HSA plans really all about? What kinds of questions should you ask, before implementing one of these plans?

Let’s start with defining an HSA plan. The HSA has two components: the qualified high deductible health plan (HDHP) and the actual savings account. To take full advantage of the program, the HDHP must qualify. Not every health plan with a high deductible will work. An example of a typical plan allowed in today’s marketplace would have a $2,000 deductible for a single employee and a $4,000 for an employee with dependents. Other than some very minor wellness visits, there is no coverage until the deductible is met. Starting January 1, 2006, plans can only include prescription drug coverage that is subject to the same deductible. After purchasing the HDHP, the savings account will need to be purchased. Yes, these are purchased, they are not free. The fees can range from simple monthly amounts to a range of fees based on the services provided. Some accounts will have an investment option, where earnings can be tax free.

So why purchase an HSA?

The first question to ask yourself is “What is your motivation to have an HSA plan?” We have talked with many employer groups who have heard rumors that these plans will save them a lot of money. The reality is that you might save some money. If your only motivation is to save money, there may be better plans for essentially the same amount of premium. While it is possible to save money with an HSA plan, you must realize that the savings are not always immediate and may not occur until very long term.

If tax advantage, not cost savings, is your motivation, you may be a good candidate to purchase an HSA plan. The HSA savings account allows a person to save dollars either on a pre-tax basis or claim an above-the-line tax deduction in April. Unused dollars can roll over in the account each year. As dollars are used to offset the high deductible or pay for qualified health related services and supplies, they maintain this tax advantage. If the dollars are used for non-qualified purchases, a person will be penalized, similar to the penalties involved with 401k plans.

My employees would never go for this

If you have a small company, it may be easy for you to have consensus that this is a good idea. But even in companies of five or more employees, this can be difficult. There still may be a workable solution. We have found that with many companies, the owners or highly compensated employees are the ones most interested in the HSA plan. This is mostly due to the tax advantage they need and will receive. SAO members will be allowed to offer HSA plans to a specific class of employees – i.e., management – and a typical PPO plan to other employees.

What about other plans?

SAO Members are eligible for several benefit options designed to save money and provide higher levels of coverage: PPO medical plans from Providence and Health Net, dental plans with no waiting periods, vision, life & disability. All plans are discounted for association members. Additionally, employers can enjoy the ease of on-line enrollment and free web-based COBRA administration.

How do I find out more?

The staff at GET-Benefits will be happy to assist you in your analysis and if it makes sense, securing a plan that meets your needs. Call today at 800-627-5345.