There is a new alphabet soup in the employee benefits marketplace — HSAs. The Health Savings Account was born Dec. 8, 2003, when President George W. Bush signed HSAs into law as part of the Modernization Act of 2003.
Out of the top four group health insurance providers that write group health, only one has an HSA available. Others are expected to follow suit, but have not announced when.
HSAs, like their precursor, MSAs (Medical Savings Accounts), have many appealing features.
* Premiums are 100 percent tax-deductible.
* Personal contributions into HSAs are tax-deductible.
* Deposits into HSAs accumulate tax-deferred, similar to a 401(k) and other retirement plans.
* There are catch-up provisions (in contributions) once someone reaches age 55.
* There are lower deductible limits to HSAs vs. MSAs — $1,000 for single, $2,000 for family coverage.
* HSAs are fully portable.
* Lower premiums make this program highly attractive to cost-sensitive employers.
With so many attractive features, you’d think there would be a rush to jump on the HSA bandwagon. But consider a longer look before you leap.
A closer analysis of HSAs reveals several reasons why they might not be a good idea right now.
* Being the first one on the block to get the newest anything has historically been a timely mistake. Just look at Betamax videocassette recorders vs. VHS.
* More providers will be offering this program in the near future; the number of carriers offering it should at least double within two years.
* With competition comes better rates and a more informed seller and consumer.
* Your staff may be less understanding if you look into this too early.
* If your current schedule of benefits has no deductible or a low deductible offering, there are more planning considerations to take into account.
Employee benefits advisers are being asked to hurry to the marketplace by clients. But advisers must consider the possibilities of this program in overall benefits funding strategies. That said, however, it’s imperative to move slowly with anything brand new.
Take your time before jumping in as an early adopter. Robert Arnoff ([email protected]) is president of Arnoff and Associates Inc., an employee benefits firm. Reach him at (440) 717-1775 or at www.arnoffandassociates.com
