Health Savings Accounts (HSAs) have grown in popularity as their ease of use and cost-savings potential have been recognized by more and more employers and healthcare consumers. What are the specific advantages of an HSA for employers and employees? We sat down with Eric Johnson, a leading health insurance industry presenter and founder of ComedyCE.com to find out in our lastest eESI podcast, What You Should Know About HSAs.
Below you’ll find a summary what Johnson and other HR and healthcare industry experts have to say about the many benefits of HSAs. And, you can simply click the link below to listen to the podcast.
Three Important Advantages of HSA for Employers
The number one advantage of offering benefits plans that include an HSA option is that it makes employees happy. Health savings accounts are popular with employees across all age groups. In HSA use increasing among those under 65, BenefitsPro.com’s Allison Bell offers the latest statistics, noting that while total health coverage use remained static between 2016 and 2017, the percentage of HSA usage grew.
Employees appreciate having options and providing an HSA based benefit plan gives them those options. That’s an ROI that goes beyond just numbers on a spreadsheet.
Additionally, Eric Johnson tells us that health benefits plans utilizing HSAs are simpler than many of the alternatives. With fewer “moving parts,” high-deductible health plans (HDHP) paired with a health savings account are easier for employers to compare when choosing among providers. Plus, because employees decide how to spend HSA funds, there are fewer issues to consider regarding treatment options and co-pays.
Finally, it isn’t just employees who realize tax savings from an HSA supporting healthcare benefits plan. Employers see tax savings, too. As Johnson explains in our podcast, employer contributions to an employee’s HSA are tax deductible just like any other benefit. Plus, employee contributions to their own HSAs reduce their taxable income and their employer’s payroll tax obligation.
Of course, there are significant HSA advantages for employees. We’ve summarized three of them below.
Three Important Advantages of HSA for Employees
One of the main advantages of an HSA for employees is that it provides them with premium, pre-tax savings. The money placed in a health savings account isn’t subject to income tax. As Lisa Higgins at HRDailyAdvisor.com explains, in The Latest Health Savings Account Trends You Should Know About, this tax savings feature is a significant benefit. Once placed in a health savings account, an employee’s money grows tax-free. Unused funds placed in the account roll over from year to year, so contributing employees benefit from the effect of compound interest.
Another key advantage for employees who choose to pair a high-deductible health insurance plan with an HSA is the account’s portability, says our podcast interviewee, Eric Johnson. An employee’s health insurance coverage options are usually determined by their employer. When an employee changes jobs, their benefits options change too. But, the health savings account attaches to the employee, not the job. So, no matter where a person works, the funds in their HSA remain with them.
Using an HSA also empowers employees to take control of their healthcare. It is the individual employee who manages the funds held in an HSA. The employee can choose to spend them on the healthcare that matters most to them and their family.
As long as the money is spent on qualified health services or supplies, the employee is free to choose how it is distributed. That means an employee can choose where and when to have a lab test and select the provider they prefer for treatment. Vision and dental care are qualified services. So employees can take care of their whole health using their HSA funds.
Some Final Notes Regarding the Addition of an HSA Option to Your Company’s Health Benefits Offerings
As we ended our interview with Eric Johnson, he made one final, very salient point. Health savings accounts are here and here to stay. The Affordable Care Act forced many employers to adjust their healthcare benefits spending. As healthcare costs continue to rise, many employers can only offer a high-deductible plan.
If your company is already moving toward a high-deductible model, then adding an HSA option will help you and your employees save money. By educating employees and communicating the long- and short-term benefits of HSAs to them, healthcare becomes more personalized and affordable, and everyone wins.
If you’d like to add an HSA option to your healthcare benefits plan, eESI can help. To get started, download our free HSA Checklist. If you have any questions, just give us a call. We are your partner in HR.