By Steve Neeleman of HealthEquity
Consumer-driven health care is changing the insurance landscape. With new healthcare legislation, such as the Affordable Care Act, the already complex insurance industry has become even more difficult to navigate. Because of these changes, greater variety in health care options is crucial and plans that allow for lower premiums and health savings accounts (HSAs) have begun to see dramatic growth in the United States.
(Photo courtesy of Steve Neeleman)
Today, 15 percent of all employees in the United States are estimated to have HSA-typed health plans and 20 percent of all employers offer HSAs. These numbers have increased by 20 percent over the last year, making these plans the fastest growing benefit plan. These plans are becoming popular with both large and small companies.
Benefits of ABHPs vs. Traditional Health Plans
One of the main differences between HSA plans and traditional health plans is that HSAs allow consumers to decide how much money is being saved for medical expenses, and what it’s being spent on. HSAs also allow consumers to save on medical expenses because dollars saved within these accounts are tax-free, and can also be invested toward retirement in addition to qualified medical expenses.
HSAs benefit employers as well because it allows for company contributions/matching, giving businesses an opportunity to garner increased employee loyalty. This investment demonstrates to employees that their company is committed to their well-being and is willing to fund their healthcare. While this alone is certainly not enough to convince employees to stick around, it is a valuable incentive to attract and retain top talent.
Perhaps the largest contributing factor to businesses adopting HSAs, however, is the long-term savings businesses can experience. Compared to traditional health plans, HSAs are expected to experience lower costs for employers, as premiums on traditional plans are expected to increase at a higher rate.
Small Businesses and HSAs
For some small businesses, it can seem like an unnecessary expenditure to provide health care benefits. After all, under the Affordable Care Act, small businesses are under no obligation to provide benefits to their employees if they employ fewer than 50 people. However, providing benefits can result in many long-term gains for your business and your employees as well, especially when your business is under no legal obligation to do so.
First, unlike traditional health plans, HSAs also allow you to directly contribute to your employees’ long term savings, providing you with another way to tangibly invest in your employees’ health care — and in their future.
These types of health plans also give consumers more autonomy and control over their health care, making them more informed and thus less likely to lean on human resources once enrolled in a plan. Initially however, employees may show confusion over the specifics of HSA-type plans, and may require some education upfront. Also, they may struggle to adjust financially, but by offering to contribute directly to their savings account to offset the cost of high-deductibles, companies can support employees as they adjust to the new out-of-pocket expenses.
Another benefit for small businesses that offer HSAs is that these businesses experience significant savings in unlikely ways. In fact, the higher the percentage of employees that opt for an HSA over a traditional health plan, the more the company saves overall. For small businesses, these savings can really add up and be the difference between sinking or swimming in the early years of growth.
Although enterprises and large organizations are leading the charge, small businesses can reap myriad benefits from adopting HSAs, empowering themselves and their employees to have greater control of their health care finances.
This article is written and provided by Stephen D. Neeleman, M.D. Stephen is the founder and vice chairman of HealthEquity (NASDAQ: HQY), a leading HSA administrator. A former surgeon, he is also the author of “The Complete HSA Guidebook — How to Make Health Savings Accounts Work for You” (hsaguidebook.com).
The views, opinions and positions expressed within this guest post are those of the authors alone and do not represent those of CBS Small Business Pulse or the CBS Corporation. The accuracy, completeness and validity of any statements made within this article are verified solely by the authors.