How High Deductible Medical Plans Save Money
If you’re like most employers, you’ve been squeezed by increasing premiums for health care benefits for yourself and your employees. Chances are, you’re on the lookout for ways to control those escalating health care costs while still providing your workers with the quality coverage for catastrophic care they need for themselves and their families.
That’s where a HDHP/HSA plan comes in.
HDHP/HSA stands for “high deductible health plan/health savings account,” an increasingly popular option among employers. In fact, about 17 percent of all employers have moved to offering HDHP/HSA plans for their employees in order to save money on health insurance premiums. Here’s how it works:
A high-deductible health plan saves on insurance premiums by having employees pick up more of the cost of routine medical care and small emergencies. Since truly major medical events are still comparatively few and far between, a higher deductible goes a long way to helping to control insurance premiums for workers and their employers. Currently, the law requires these plans to set minimum annual deductibles of $1,200 for individual plans, and $2,400 for family plans.
Contributing to an HSA
To help offset the burden of higher deductibles, though, the law also allows those who have a qualified HDHP to contribute pre-tax dollars to a health savings account. Any contributions grow tax free, and can be withdrawn tax free to pay for qualified medical expenses. The catch: Any withdrawals for any purpose other than to pay for qualified medical expenses are subject to income tax and a penalty of 20 percent.
As an employer, you can also match your employee contributions to their own HSA. As of 2012, covered individuals can contribute up to $3,100 for individual plans or $6,250 for family plans each year. though a 20 percent penalty, plus income taxes, applies to withdrawals for any other purpose.
Not everyone can qualify for an HSA. To contribute, you must first own or be covered by an HDHP. You cannot qualify for an HDHP, however, if you also qualify for a traditional major medical plan.
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