Employers across the country are starting to embrace high deductible health insurance plans. These plans offer a long-awaited opportunity for companies to rein in ever-rising healthcare costs while encouraging employees to be more accountable for their own well-being. In 2012, over 13.5 million people were covered by high deductible health insurance plans, 2 million more than the previous year.
One exciting component of high deductible plans is the Health Savings Account (HSA) benefit. HSAs allow employees to put away pre-tax earnings that can be applied to qualified healthcare expenses. The beauty of these plans is that unlike other benefits, with HSAs the money stays with the individual forever, even if he or she changes jobs. In addition, funds roll over from year to year and may be invested. And, so long as the funds are used for qualified medical expenses, an individual will not be taxed on withdrawals from the account.
For both employers and employees, HSA-Eligible High Deductible Healthcare plans offer a great opportunity to save. Currently, individuals can put away $3,250 and families $6,450 per year in an HSA. Depending on their size, companies can save anywhere from thousands to millions of dollars a year on premiums by switching from a co-pay-based plan to a high-deductible plan.
But while there are many benefits to offering an HSA benefit, there are also many complexities. For example, the coordination rules between HSAs, Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs) are intricate and somewhat confusing.
A few basic distinctions:
- FSA accounts are established by the employer and funded by the employee. Any unused funds revert to the employer at year’s end. HRA accounts are established and funded by the employer. HSA accounts can be opened and funded by the employer, employee, or another third party. All funds stay with the employee.
- Employees cannot contribute to an HSA and be enrolled in an employer-sponsored HRA or Health FSA unless the HRA or Health FSA is a Limited Purpose (covering only dental and vision expenses).
- In the case of married couples, if one spouse contributes to an HSA, the other spouse cannot be in a Health FSA.
For more information on the benefits and limitations of high deductible health plans, please speak to a Sentinel representative, or visit https://www.sentinelgroup.com/main/Members/Member-Services/FAQ--Health-Savings-Accounts-(HSAs).aspx to learn more.
Also, don't miss out on our upcoming webinar Prepare for a Healthy Future: Understanding Health Savings Accounts (HSAs) on June 13, 2013 at 2:00 p.m.