Health Savings Accounts Are Hot Right Now
While traditional health insurance plans continue to be the dominant form of coverage, high-deductible and consumer-driven health plans are on the rise. These plans include either health savings accounts (HSAs) or health reimbursement arrangements (HRAs). The steady growth is employers responding to rising health insurance costs.
In this issue of Benefits@Work, we'll briefly look at what HSAs actually are. But bottom line (and, admittedly, upfront), "an employer can feel pretty darn good about offering workers this option," says Eric Haglund, principal at Digital Benefit Advisors, a division of Digital Insurance.
A HSA is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a qualified high-deductible health plan (HDHP). The funds contributed to an account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate year to year if not spent. HSAs are owned by the individual, which differentiates them from company-owned HRAs. HSA funds may be used to pay for qualified medical expenses at any time without federal tax liability or penalty.
HSAs are an important part of health reform that will help reduce the growth of health care costs and increase the efficiency of the health care system. HSAs encourage saving for future health care expenses, allow the patient to receive needed care without a gatekeeper to determine what benefits are allowed and make consumers more responsible for their own health care choices through the required HDHP.
And they're working. Surveys find that individuals in consumer-directed plans "were more likely than those with traditional coverage to exhibit a number of cost-conscious behaviors." In fact, a recent Mercer study shows the cost of medical coverage through HSAs averaged about 20 percent less than the average medical coverage through a preferred provider organization.
The Employee Benefit Research Institute notes that consumer-directed plan enrollees were more likely to check whether their plans would cover specific care and do cost comparisons before receiving it, were more likely to ask for generic drugs and more likely to participate in health-risk assessment programs.
Sound appealing? Please be on the look-out for more HSA details in future e-newsletters - or you can always contact your Digital benefits consultant for more information.
