In this second article on employee benefits planning, we explain one of the main trends plan administrators need to be aware of in 2015.
According to research performed by the Kaiser Family Foundation and Health Research & Educational Trust, health insurance deductibles have almost doubled since 2009.
This trend has given rise to the use of high deductible health plans (HDHP) – insurance plans with higher deductibles and lower premiums than traditional health plans. While HDHP models offer several benefits, employers must find the perfect balance when shifting these costs to employees. On one hand, these types of plans free employees from having to pay significantly higher premiums, while offering them increased input in their health plans. On the other hand, HDHP can wreak havoc on an employee if an injury or illness strikes.
The Popularity of HDHPS
According to a survey performed by Princeton Survey Research Associations International published by Bankrate.com, over 40% of consumers actually prefer HDHPs over a traditional health care plan.
Other key highlights:
- 52% of Americans making $50,000 each year prefer plans with higher deductibles and lower premiums, while 39% of those earning less would make the identical choice
- 46% of people between 18 and 29 prefer plans with a low deductible and high monthly premium, in comparison to 33% of those who were 50 or older
- 16% of seniors 65 or older prefer neither option, in comparison to 3% of the youngest participants
HDHPs are growing in popularity mainly because many people are relatively healthy and are able to afford their higher deductibles for rare health care visits. However, employees more likely to need health care services or those with chronic conditions may determine HDHPs to be a less favorable option. Or, these types of employees may need to couple an HDHP with other insurance products.
Health Spending Accounts (HSA)
To offset the higher deductibles of HDHPs, many employers allow their employees to set up tax-advantaged health savings accounts (HSA) or consumer-driven health plan (CDHP). HSAs allow employees to pay for their health-care related expenses with tax-free dollars before their deductible has been met.
Many employers allow their employees to contribute to their HSAs on a regular basis as a payroll deduction. Some employers even make contributions to the employee’s HSA accounts. HSAs are different from flexible spending accounts because the employee keeps the HSA even if they change job.
Health Reimbursement Arrangement (HRA)
HRAs allow employers to be the sole contributors to plans employees can use to pay for healthcare expenses not reimbursed through the HDHP. However, all of unused funds are lost at the end of the year and when employees change jobs, they are no longer eligible to access the HRA.
When HDHPs are combined with either an HRA or HSA, they have the ability to form a win-win situation for all parties looking to manage healthcare costs.
Catherine oversees UBF's daily operations and client retention strategy. She has a background in mathematics, economics, and human resources. In her spare time, she enjoys spending time with her family, taking the dog on long walks, and caring for a small and unfruitful garden.