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September 2017  Volume 15, Number 9        

health benefits

Switching to a High-Deductible Health Plan? Here’s How to Explain the Change

High-deductible health plans (HDHPs) are gaining in popularity as a way for employers to save money and to give employees more say on how their health care dollars are spent.

Many employees, though, are apprehensive about switching from a traditional insurance plan to an HDHP because it’s going to cost them more in out-of-pocket expenses. If you decide to go this route, here are a few points you can share with your employees to alleviate their concerns.

HDHPs Are Similar to Traditional Insurance

An HDHP is a traditional health insurance plan that has higher annual deductibles and out-of-pocket maximums. This type of plan helps keep your monthly premiums down.

The purpose of an HDHP is to protect insureds from catastrophic expenses, not to pay day-to-day medical expenses. You will be paying the out-of-pocket expenses — including deductibles, copayments and coinsurance — billed by in-network providers until you meet your annual deductible. The insurance company will then pay 100 percent of the allowable amount of covered expenses for the remainder of the calendar year. This reduces overhead costs because the insurance company does not need to be involved in these smaller transactions.

All preventive care services, though, are covered 100 percent.

An HDHP Will Save You Money

An HDHP premium is significantly less expensive than traditional insurance. Premiums generally increase each year, but they tend to have lower annual cost increases than traditional insurance.

To help you better handle the out-of-pocket costs you might face, we’ve paired the HDHP with an account to help you save money for this purpose. You will be eligible for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA), depending on the information you provide.

An HSA Gives You a Tax Advantage

If you qualify for this account, you can pay for health care expenses for you, your spouse and your dependents with pre-tax money — even if they are not covered by the HDHP. We will deduct the amount you request from your paycheck and put it in the HSA. You can increase or decrease the amount any time you like. The funds in this account will grow tax-free and will be available to you on a tax-free basis to pay your medical costs.

You’ll also be able to get a tax deduction for contributions you make directly to this account (although not as part of payroll deferral). For instance, if you wanted to maximize your prior year HSA contributions in April, you could make an HSA contribution directly through an HSA custodian to get the tax benefit.

If you do withdraw money from your HSA for reasons other than medical expenses, you will have to pay income tax on the amount. And if you are under 65 years old and withdraw money for non-medical expenses, you will be charged an additional 20 percent penalty.

Who Is Eligible for an HSA Advantage

To be an eligible for an HSA, you must be covered under an HDHP. In addition, you:

  • Can’t have another type of health coverage
  • Can’t be or enrolled in Medicare.
  • Can’t be claimed as a dependent on someone else’s tax return.

An HRA Is Also a Great Savings Tool

If you do not qualify for an HSA, you can still put money into an HRA. An HRA is an employer-funded tax-sheltered account that you can use to reimburse yourself for allowable medical expenses. You don’t have to use all of the money in your account before the end of the year, but an HRA account doesn’t earn interest and you’ll have to forfeit the money if you switch health plans.

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In this issue:

This Just In...

Could Direct Primary Care Control Your Health Care Benefit Costs?

Opioid Addiction in the Workplace: How to Help Employees

Switching to a High-Deductible Health Plan? Here’s How to Explain the Change

Great Reasons to Offer a 529 Savings Plan



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