Employers Increasingly Embracing High-Deductible Health Plans

More and more employers are offering high-deductible health plans, or HDHPs. These are specially-designed major-medical health insurance plans that come with a relatively high deductible. To compensate for the high deductible, plan participants can contribute pre-tax dollars to a health savings account, or HSA. Money in HSAs compounds tax-deferred, and funds spent for qualified health care expenses are tax free. HSAs are only available in combination with a high-deductible health plan.

Because the plan isn’t on the hook for common but small expenses, HDHP/HSA plans are able to save a good deal of money in claims. Part of this savings, of course, flows back to plan sponsors in the form of reduced health care premiums.

These reduced premiums have been a key driving factor in causing employers to migrate to HDHP plans. Case in point: In 2006, only 4 percent of covered workers were covered under an HDHP; as of 2012, that figure had exploded to 19 percent. Likewise, the percentage of workers covered under a plan with at least a $1,000 deductible also exploded, from just 10 percent in 2006 to 34 percent this year. At small employers, the percentage of workers with deductibles over $1,000 was close to half.

Savings Data

According to the 2012 Kaiser Family Foundation’s Employer Health Benefit Survey, the average cost to employers was $4,163 per year per worker for an individual plan, while family HDHP plans cost employers $10,409 per covered worker, on average. HMOs, on average, cost employers $4,554 for individual plans and $11,166 for family plans, on average. Other plan types are even more expensive, both for employers and workers.

When contributions from employees and employers are combined, the total premium for HDHP workplace plans was $411 for individuals and $1,177 for families. This compares favorably with $468 per month for individual plans and $1,362 for family plans of all types.

Of course, to maximize the efficiency of these plans, the employers and employees can’t simply pocket the cash savings. They should also contribute part or all of the premium savings to health savings accounts.

2013 Limits

For tax year 2013, the IRS sets an annual limit of $3,250 for contributions to individual health savings accounts. That limit is increased to $6,450 per year for family plans.

The IRS also sets a minimum annual deductible for health plans to qualify as HDHPs – and thus qualify participants to make deductible contributions to HSAs. For individuals, the health plan must feature a minimum annual deductible of $1,250 for self-only coverage, and $2,500 for family coverage. Out of pocket expenses are capped at $6,250 per year for individual coverage, and $12,500 for families.

Employer Contributions

Employers can choose to contribute to employee HSAs as part of the overall compensation package. Generally, you can’t match employee contributions, because that would run afoul of comparability rules. Employers must make a comparable match among all eligible employees. Generally, employers will make contributions gradually over the plan year, since they have no control over the funds once the contribution is made.

Communication is Key

For most employees in good health, there are advantages to going with an HDHP/HSA combination – especially for those in higher tax brackets. Premiums are lower for the employee as well as the employer, and it’s easy for most workers to grasp the value of pre-tax contributions. Some workers, however, focus on the higher deductibles, rather than on the long-term benefits.

Additionally, some workers and families with people with long term, chronic illnesses that require regular medical treatment don’t benefit much, or at all, from these plans. Owners and HR managers may want to make other types of plans available for workers who fall into this category.  If you have any questions about your benefits program, call ACBI at 203-259-7580 or visit our website

Employee Benefits: Communication is Key

Many surveys have shown that even though employees routinely underestimate how much their benefits cost their employers, they do value their benefits – when they know and understand them.

That means plan administrators, human resources professionals and managers need to work together to educate workers on the benefits available to them through their workplaces. After all, a benefit that is unused or unappreciated has little retention value, and does nothing for the employer but use up premium dollars. It does not help employees feel valued or wanted. In fact, research from the Voluntary Benefits Association indicates that even an above-average benefits package loses more than half of its effectiveness in retaining workers and maintaining morale if plan communications are substandard.

Spread the Word

Leverage the communications materials benefits companies provide for workers. Many of their materials educate workers on the benefits and riders available to them, and explain how these benefits improve their lives. These materials are generally available to plan sponsors for free, or at a very nominal cost. Work with your agent or representative to keep your educational materials up to date.

Use your bulletin board. Your board can hold more than just the mandatory Department of Labor posters. Have your HR staff keep the board updated with the latest materials from the vendor life insurance, disability insurance, health & wellness, and other employee benefits partners.

Have a section reserved for new announcements to make extra sure your employees see them.

Insert key plan changes and new benefits announcements in employee paycheck envelopes, if you pay with paper checks. This is one envelope you know your employees will open.

Hold regular meetings with staff in which your HR experts and company agents are available to explain and answer questions about your employee benefits package.

Make sure senior management is present at benefits meetings. The questions and comments your employees have can be valuable indicators of how your employees perceive their benefits and the company.

Company Selection

Matt Stein, a 12-year veteran of the voluntary employee benefit industry, suggests selecting benefit providers not just on the terms of the benefit package itself, but on the robustness of the provider’s administrative support system as well. For example, best results are achieved when a company has an easily accessible 1-800 number and intuitive website for post-enrollment support.

If you use an enrollment company, they should have a staff of licensed and knowledgeable non-commissioned advisors able to answer specific questions for your workers and HR staff alike.  ACBI has an exceptional benefits team and access to HR tools that can answer all your questions.  Call us today at 203-259-7580 or visit our website.