A healthy and happy workplace is a
productive and profitable one. That’s
why many companies have started offering Health Savings Accounts (HSAs)
to their employees.
“There are no retirement plan vehicles
that offer a triple tax preference — tax-free
in, tax-free growth and tax-free out — like
an HSA does,” says Amy Chambers, director of consumer engaged health care for
Priority Health, a Michigan-based health
insurance plan. “Employers are able to
lower their premiums immediately, and
employees get the peace of mind knowing
they can cover any unexpected future medical costs.”
Smart Business spoke with Chambers
on what advantages both employers and
employees can gain by getting involved
with HSAs.
What is an HSA?
HSAs are employee-owned, portable, tax-free trust accounts. Employees, their
employers or both can contribute to an
HSA when the employee is covered by a
high-deductible health plan. Employees
may use the money at any time to pay for
qualified medical expenses or save it for
future expenses.
What are the advantages employers gain by
offering HSAs to employees?
The financial benefit is that employers
are able to lower their premiums immediately with HSAs and set themselves on
track for lower long-term premium trends
in the future. Another benefit is that HSAs
will also play a competitive role in the
labor market as many new workers are
gravitating toward these types of plans. As
these accounts take hold, employers will
have the opportunity to maintain a competitive cost advantage while increasing
their ability to attract and retain good, qualified employees.
The engagement of employees in their
own health care will prove a benefit for
both employees and their employers.
Finally, employees will learn that there’s a
direct connection between their good or poor lifestyle decisions and the higher
costs that come with the poor decisions.
We’re certainly not saying that all medical
costs are attributable to lifestyle decisions,
but we do know that many of them are.
What are the advantages employees can
gain in participating in an HSA?
Employees must pay for their own services up to the deductible, but above that,
there’s the security of the high-deductible
plan with an out-of-pocket maximum.
HSAs also carry great tax savings since
HSA money goes in tax-free, grows tax-free
and comes out tax-free, as long as it’s used
for qualified medical expenses. There’s no
other tax shelter like it out there.
Additionally, these accounts are portable,
meaning that the money belongs to the
employees and follows them through their
careers. Employees can make their own
health care decisions, and those who manage their costs well are rewarded with
increased savings.
Finally, the longer they’re in the plan, the
greater the savings. For many people, that
will form a powerful part of their retirement plans in years ahead. The rewards of
an HSA can be great. If an employer is willing to invest in their employees’ HSA education and can make a contribution to each
employee’s account to get the ball rolling,
an HSA can make financial sense for
almost any employee.
Are there any disadvantages to HSAs?
The biggest is that they’re new, and for
employees who don’t like change, ‘new’
can be bad. So, we don’t suggest that
employers can just drop an HSA into their
business and consider it done. They have
to work at educating their employees on
how these plans work. Employers need to
make sure they understand how these
plans will work for them. We also think it’s
important for employers to keep supporting the plan after it has been launched.
They must keep demonstrating their commitment to its success, keep educating
people — especially new employees —
and continue to help employees use the
plan well and effectively. This isn’t a one-year tryout. Employers have to be in it for
the long run for the benefits to accrue for
themselves and their employees.
Where does an HSA stand in value in comparison to other employee benefits an
employer can offer?
I would put an HSA right up there with
the best that both health care and retirement plans have to offer. There are no
retirement plan vehicles that offer a triple
tax preference — tax-free in, tax-free
growth and tax-free out. The best an
employee can get with a retirement plan
offering is two tax preferences out of the
three. Providing employees with a high-quality, sustainable health care product
like a high deductible health plan, accompanied by a tax-preferred account like an
HSA, could be an exciting addition to any
employer’s benefit lineup.
AMY CHAMBERS is director of consumer engaged health care
for Priority Health, a Michigan-based health plan. Reach her at
(616) 464-8540.