Voluntary Benefits Make HDHPs as Comfy as Your Favorite Yoga Pants
There are few things better in life than coming home from a long day at work, changing out of your professional clothes and hopping into your cozies. For me, this is my worn Cubs shirt, fuzzy socks and my favorite yoga pants. I typically sport this ensemble after my kids are tucked in bed with a computer on my lap, reruns of Gilmore Girls in the background and a whole lot of insurance emails to tackle.
I'm currently assuming this very cozy position and in doing so, it occurred to me that, for many folks, the topic of insurance just isn’t comfortable. In fact, one area of insurance that can be quite uncomfortable are high deductible health plans, also known as HDHPs.
With these types of plans, deductibles average $2500 and soar to an allowed $6,650 maximum for single, and $13,300 for a family. HDHPs don't have physician copays, and you pay for the full cost of services or prescriptions received (less network discounts) which apply to the deductible and out-of-pocket.
HDHPs continue to gain popularity because they provide visibility into the true cost of procedures, giving the freedom to choose where employees spend their money. When paired with a Health Savings Account (HSA), high deductible health plans become a powerful tool and great financial strategy. HSAs are funded by employees, employers or a combination of both.
For 2018, the IRS allows an annual contribution of $3,450 for single coverage and $6,900 for family coverage. Money put into an HSA is tax-free and remains that way even when an employees withdraws it for qualified medical expenses. The money grows and rolls over from year to year and most banking arrangements have great investment opportunities. Many use their HSA as a “medical 401k” to avoid paying taxes on medical expenses in retirement years – an HSA is always tax-free and stays with you.
When an HSA balance grows, suddenly that high deductible isn’t so uncomfortable. However, it does take a while for people to build up their HSA account values, and if medical costs are incurred, sometimes the money simply isn’t there to cover the bill. Perhaps those saving for retirement don’t want to tap into an HSA account at all…but how can your employees offset costs associated with that high deductible?
Let me introduce you to the notion of voluntary benefits.
HSA-compliant voluntary worksite benefits such as Accident, Critical Illness and Hospital Indemnity plans can work alongside an HDHP to fill the gaps, helping to offset the costs of the unexpected:
- Accident: Pays for treatments resulting from a covered accident such as x-rays, fractures, emergency care and therapy services.
- Critical Illness: Provides a lump sum payment upon the diagnosis of a covered condition. Payment is not tied to a reimbursement but available for any medical or non-medical expense.
- Hospital Indemnity: Pays a set amount if you are confined to a hospital due to injury or illness, typically paid in a lump sum determined by a per day allowance.
Voluntary benefits are pre-taxed through employee payroll deductions and are typically portable. They’ll also usually have a wellness benefit that will pay employees to get their annual physical. Most importantly, these plans can assist in the strategy of making your employees' HSA a true Health Savings Account and not a Health Spending Account.
The combination of HDHPs and voluntary benefits are truly the perfect pair… almost as perfect as my favorite pair of yoga pants.
Do voluntary benefits sound like a cozy fit for your organization? Talk to a member of the ‘A’ Team – we’ll make sure your insurance strategy is comfortable!
- The Power of Voluntary Benefits
- Voluntary Benefits are a Win-Win
- HSAs and Voluntary Benefits Go Together Like Peanut Butter & Jelly
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