So, where is the savings with high-deductible health plans?
According to the 2012 Kaiser Family Foundation’s Employer Health Benefit Survey, the average cost to employers was $4,163 per year per worker for an individual plan, while family HDHP plans cost employers $10,409 per covered worker, on average. HMOs, on average, cost employers $4,554 for individual plans and $11,166 for family plans, on average. Other plan types are even more expensive, both for employers and workers.
When contributions from employees and employers are combined, the total premium for HDHP workplace plans was $411 for individuals and $1,177 for families. This compares favorably with $468 per month for individual plans and $1,362 for family plans of all types.
Of course, to maximize the efficiency of these plans, the employers and employees can’t simply pocket the cash savings. They should also contribute part or all of the premium savings to health savings accounts.
What are the 2013 limits?
For tax year 2013, the IRS sets an annual limit of $3,250 for contributions to individual health savings accounts. That limit is increased to $6,450 per year for family plans.
The IRS also sets a minimum annual deductible for health plans to qualify as HDHPs – and thus qualify participants to make deductible contributions to HSAs. For individuals, the health plan must feature a minimum annual deductible of $1,250 for self-only coverage, and $2,500 for family coverage. Out of pocket expenses are capped at $6,250 per year for individual coverage, and $12,500 for families.
Can employers contribute to a high-deductible health plan?
Employers can choose to contribute to employee HSAs as part of the overall compensation package. Generally, you can’t match employee contributions, because that would run afoul of comparability rules. Employers must make a comparable match among all eligible employees. Generally, employers will make contributions gradually over the plan year, since they have no control over the funds once the contribution is made.
Communication is Key
For most employees in good health, there are advantages to going with an HDHP/HSA combination – especially for those in higher tax brackets. Premiums are lower for the employee as well as the employer, and it’s easy for most workers to grasp the value of pre-tax contributions. Some workers, however, focus on the higher deductibles, rather than on the long-term benefits.
Additionally, some workers and families with people with long term, chronic illnesses that require regular medical treatment don’t benefit much, or at all, from these plans. Owners and HR managers may want to make other types of plans available for workers who fall into this category.