HSAs Saving Arizona Employers 10-35% on Health Premiums

Written by Joanna Morrow

Joanna Morrow, Principal and Founder of Employer Benefits & Advice, is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU).

HSAs Saving Arizona Employers 10-35% on Health Premiums

Turnover, recruiting quality employees, or designing an attractive compensation package that doesn’t break the bank are all problems that can be partially addressed using employee benefits.

In the coming weeks as employers look to make changes to their benefits for 2020, many will be looking to adopt strategies that help solve bigger problems for the company.

From now until December I will be showcasing various trends in employer-sponsored benefit plans that are helping to curb health insurance costs for both employers and their employees.

This week we look at . . .

Health Savings Accounts (HSA)

1. What are the Potential Savings?

A high deductible health plan (HDHP) when paired with a Health Savings Account (HSA) will typically save an employer anywhere from 10% – 35% on annual medical premiums.

2. What Is It?

An HSA is a tax-exempt savings account established by the IRS for the purpose of paying for qualified medical expenses for an individual and/or his or her spouse and tax dependents.

3. Where Do We Get One?

All health insurance carriers offer a number of HDHPs that can be paired with an HSA. All major banks offer the actual savings account component, or insurance companies often partner with large entities that specialize solely in H.S.A. administration like Health Equity or Optum Bank. The latter is my preference and often the better route to go.

4. How Does It Work?

With the money employees save on premiums by choosing an HSA qualified medical plan, they free up cashflow to deposit some or all of the savings into their HSA through pre-tax payroll deduction. That money can then be used for qualified medical expenses.

Employees who choose to open an HSA receive a Visa or Mastercard debit card from the HSA administrator, which they can swipe just like a regular ATM card anytime they want to buy an office visit, prescription medication, dental, vision services and much more.

5. Who Is Best Suited for an HSA Plan?

Nearly 95% of my employer clients, regardless of size, offer an HSA qualified plan as at least one plan option available to employees. Because employers are also saving considerable money on premiums, many of them use some of that savings to make a contribution toward the employee accounts, typically by way of a match.

Most of us in the industry also utilize a health savings account as a means for maximizing savings on healthcare.

Employees with significant prescription drug expenses such as those used to treat diabetes, MS or cancer may do better on a traditional copay plan where their prescription drugs have copays.

6. What Types of Expenses Can Be Purchased With HSA Dollars?

Each year the IRS publishes a list of all the items that can be purchased using HSA dollars. See pages 5-15 of this IRS Publication 502 for an alphabetical listing of eligible medical expenses.

The current administration is also exploring the expansion of HSA spending as a means for controlling healthcare costs using consumerism as reported in this recent Wall Street Journal article.

7. How Do Employees Benefit?

  • Contributions, earnings and qualified withdrawals are tax-free to the employee.
  • Money left in the account at the end of the year simply carries over to the next year and to accumulate.
  • That money follows the employee wherever he goes, even if he leaves his employer or moves out of state.
  • He can continue to make contributions toward it as long as it’s paired with an HSA-qualified medical plan.
  • For 2020 the IRS has increased the maximum that can be contributed to an HAS on a tax free basis:
  • $3,550 for Individuals
  • $7,100 for Families
  • Additional $1,000 catch-up contribution for employees 55+

8. How Do Employers Benefit?

  • Employer contributions to HSA accounts are also tax free.
  • For large employers required to offer “affordable” health insurance, HSA plans help to meet this requirement by allowing the employer to base contributions on this lower cost option.
  • Employees and dependents covered under an HSA have skin in the game and therefore are more likely to seek preventive care, choose generic drugs, not misuse the emergency room, and use online tools to research healthcare providers.
  • The result? Premiums for an HSA qualified plan can run as much as 35% less than a traditional copay plan benefitting both employer and employee.

Preparing For Renewal

HSA plans have grown in popularity among Arizona employers because they offer significant healthcare cost savings for both the company and its employees.

To learn more about Health Savings Accounts or to request a quote, email me at jmorrow@employerbenefitsandadvice.com or call me at 602-903-4047.