27 JULY, 2017
Health Savings Vehicles – Taking the Sting Out of High Deductibles
Will you pair a Health Savings Account with your high deductible plan in 2018?
With hospitality employers generally covering two thirds of employee health costs, high deductible plans have been touted as a key driver in helping participants become better health care shoppers, stewards of their own health, and to ensure those using more healthcare pay more. But a lifetime of traditional plans with modest copays and deductibles has conditioned behavior otherwise.
Consumer Driven Healthcare Recap. If you missed last week’s consumer-driven healthcare overview (Part 1), click CDHP Overview.
Consumer-driven healthcare is taking hold among hospitality employers. Lower premiums for employees and lower health cost for employers are making High Deductible Health Plans (HDHPs) the plan of choice. There’s definitely an upside to be had, especially for young, healthy workforces who consume less and primarily need covered preventive care, while those needing extensive or chronic care pay more out of pocket.
Hospitality Challenges. A major challenge is helping a culturally and linguistically diverse population fully understand high deductible plans at enrollment and ongoing. Furthermore, the steep deductible can be quite a shock when an expensive or unexpected health need arises, especially for line level employees. And for those without savings banked to pay costs upfront, the effects can be more than devastating. That’s where health savings vehicles and consumer support services can really make a difference.
Over the next several weeks, we will explore health savings vehicles (HSAs and HRAs) and consumer support services, beginning with Health Savings Accounts (HSAs).
HSA Considerations
HSAs are tax-advantaged savings accounts offered in conjunction with high deductible plans that are intended to provide health plan participants with some security and means to pay for eligible health-related expenses. Employer and employee HSA funding can be made before taxes are taken (federal and most states allow pretax payroll deductions). HSA interest and earnings are also tax-free and HSA withdrawals are not taxed when used for qualified medical expenses.
Because HSAs don‘t expire, they offer great appeal for those wanting to bank future health spend on a pretax basis today. Additionally, the pairing and creative funding of these accounts can be used to offset expensive deductibles which will be important for employees in times of need. Further, these plans encourage employees to save because unused funds remain in the account (rollover), enabling balances to grow over time for future healthcare events.
While the decision to offer an HSA will vary by employer, we want you to know that we have successfully assisted hospitality employers, large and small, with decision support analysis, design strategy, and HSA program implementation. Regulations continue to evolve and we will continue to monitor developments to keep you apprised. If you would like to learn more about HSAs’ potential financial upside and whether it’s a good fit for your workforce, please email [email protected] or call 703-810-3800 for a complimentary analysis.
For more HSA details, read on….
HSA Specifics and Mechanics
HSA + HDHP. To offer an HSA, the medical plan offering must be a High Deductible Health Plan. However, offering a high deductible plan does not require offering a health savings vehicle (such as an HSA or HRA). Employees can deposit funds via pre- or post-tax payroll deductions. Employers can also make pre- or post-tax contributions; however, nondiscrimination rules apply, meaning that all employer contributions must be treated equally. Employers can also make a onetime (“seed”) deposit to the accounts of new enrollees. This gives participants a head start on saving and provides means to pay current health expenses before their accounts build up through payroll deductions.
Contribution Limits. The total pre- or post-tax amount that can be deposited into an HSA by employers and employees each year. These limits can change each plan year. The limits for plan years 2017 and 2018 are stated below.
Self-Only: $3,400 for plan year 2017 (plan year 2018 – $3,450)
Family: $6,750 for plan year 2017 family coverage (plan year 2018 – $6,900)
Catch-Up Contributions, intended to enable employees nearing retirement age to increase their savings, are pretax amounts allowed above the annual contribution limit. Catch-up contribution amounts can change each plan year. For plan years 2017 and 2018, eligible individuals age 55 and older at tax year-end can deposit an additional $1,000 into their HSA.
Minimum Deductible Amounts. A Deductible is an amount a participant pays out of pocket before insurance kicks in. The Minimum Deductible Amount is the lowest level deductible amount allowed for qualification as a High Deductible Health Plan. Deductible minimums can change each plan year. The minimums for plan years 2017 and 2018 are stated below.
Self-Only: $1,300 for plan year 2017 (plan year 2018 – $1,350)
Family: $2,600 for plan year 2017 (plan year 2018 – $2,700)
Investments. HSA holders may invest account funds after meeting a required minimum balance generally set by the issuer. These funds may be invested in the same types of investment vehicles approved for IRAs (e.g., interest-earning bank accounts, annuities, CDs, stocks, mutual funds, or bonds). The account holder controls all decisions over how the money is invested. HSA holders can also choose not to invest their funds. Fiduciary rules do apply to HSAs.
COBRA Requirements. COBRA generally applies to group health plans maintained by employers having at least 20 employees on more than 50% of typical business days in the previous calendar year. In order to contribute to an HSA after termination, the employee must elect continuation coverage under the high deductible plan or elect HSA-qualified coverage in the individual market. Participants can make personal (after-tax) contributions to the HSA and deduct those contributions from their adjusted gross income when they file their personal income tax return.
About Hospitality Benefits: Empowering leading hotel companies to lower healthcare costs by bringing hospitality companies onto one purchasing platform and equipping HR and hospitality leaders with tools and services to manage staff, compliance, employee appreciation and understanding of their benefits. Because our staff has an unprecedented blend of hospitality know-how and benefits expertise, we understand your priorities and deliver services seamlessly in a manner traditionally enjoyed by only the largest companies in the industry. To get in touch and/or learn more about how we can help you contain those ever-growing (and threatening) healthcare costs, visit www.hospitalitybenefits.com.