May 22, 2019
by Tiffany Gorrell
For years, one of the hottest topics in the nation has been how to reduce the high cost of healthcare, including insurance premiums. Industry professionals and politicians continually debate the best way to bring down costs for consumers, with no real agreement on the best course of action. From revamping the Affordable Care Act (ACA) to implementing a single-payer system, each idea presents its own set of challenges.
In the meantime, brokers, employers and consumers are left trying to find new, creative ways of reducing expenses without sacrificing care. In days gone by, one solution would have been to change insurance carriers. But in today’s competitive market, carriers’ premiums are all within a few percentage points of each other.
So, how can we reduce insurance premiums for a client while still maintaining the level of care they need?
There are many potential strategies but, depending on the client, maybe it’s time to reconsider adding a Health Savings Account (HSA) to the discussion.
While HSA compatible health plans do come with a higher deductible, the premiums are lower, and they offer many benefits that regular health plans do not.
Taxes
Contributions to HSA accounts throughout the year are made pre-tax (when made through payroll deductions) for both employees and employers. For employers, it reduces the amount of FICA (Federal Insurance Contributions Act), FUCA (Federal Unemployment Tax Act) and state taxes. For employees, it reduces their taxable income, saving them money at the end of the year.
Additionally, regular medical expenses are only tax deductible for employees if they can itemize their return and even then, only expenses that exceed 10% of their adjusted gross income (AGI). But HSA contributions are always tax deductible, regardless of an employee’s AGI or their itemization eligibility.
Investments
HSA funds can also be invested. There are several companies that can assist employees in investing the money in numerous stocks and bonds. Of course, this strategy comes with a word of caution: only invest the amount that exceeds the plan out-of-pocket maximum. If there’s an emergency, an employee will want to ensure they are covered for the maximum amount they may be required to pay.
Retirement
Although employees are not able to contribute once they reach age 65, the funds in their HSA account are still available to them. Those funds become available to pay for Medicare premiums, as well. Additionally, there will no longer be a penalty for using the funds toward non-medical expenses. The withdraws are only subject to ordinary income tax.
While HSA plans may not be a good strategy for every group, they may be worth considering. With carriers offering lower deductible, high deductible health plans (HDHPs) and some offering HSA rewards for proactive wellness, such as exercise, now is a great time to explore this often-overlooked plan type.
For more help in creating a great strategy for your group, contact your LISI Sales Team today!
