High-Deductible Health Insurance Is Winning Over Employees

With skyrocketing rates on health insurance, employers (particularly small businesses) are moving to options with lower premiums, such as high-deductible health insurance. Not all employees initially see any advantage in such a change in terms of their out-of-pocket costs, but many are finding they can save more after the change.

A Health Savings Account or an HSA can only be started in combination with certain as high-deductible health insurance policies. Money contributed to the HSA is only available to pay for qualified health care expenses. Try to withdraw funds for expenses that aren’t medically related and you’ll see a 20-percent penalty fee. The list of qualified expenses is extensive, though. Several services not covered by conventional health insurance can be paid for from an HSA, such as dental care.

To persuade employees that these plans have advantages that will work for them, some businesses are contributing to employees’ new Health Savings Accounts and the idea has been gaining popularity. About 22 million consumers are now enrolled in HSA-qualified high-deductible health insurance, according to the head of health research at the Employee Benefit Research Institute.

One of the advantages of an HSA is that employees control the accounts even if employers contribute funds. Employees retain the money when they lose their job, resign or retire and the HSA balance continues to grow year after year with tax-free earnings. Individual HSA annual contribution limits remain at $3,050 in 2011, while the contribution limit for family HSA plans is $6,150.

High-deductible Health Insurance Coincides With Low Premiums

Employees are reporting it’s easier to save with the lower cost of high-deductible health plans. For example, at the Atlanta Medical Center, just over half of the employees are enrolled in an HSA plan. To increase staff enthusiasm for the transition, the center increased contribution levels to employee Health Savings Accounts by hundreds of dollars.

After a few years, some of the center’s staff are surprised at the additional savings they’re seeing. For Andrea Sweeten, who’s a contract administrator at the center, high-deductible health insurance meant much lower premiums.

With an 18-year-old daughter, the 45-year-old was paying $260 every two weeks. Since they rarely went to the doctor, she could see how that was just a waste of money. After switching to a high-deductible health plan with a $2,400 deductible, her premium dropped to $62. She deposits much of the savings in an HSA and plans to buy laser eye surgery with the surplus.

High-deductible health insurance plans typically have deductibles from $1,000 to $5,000, but those that are qualified to work with an HSA must have deductibles ranging from $1,200 to $5,950 for individuals and from $2,400 to $11,900 for families.

That kind of out-of-pocket expense can be trouble for consumers who do not plan for the unexpected. One way to cut that deductible until the HSA balance has had time to grow is with accident insurance. Preventive care is 100 percent covered before the deductible is met with insurance purchased after the passage of health care reform, but accidents take consumers by surprise. For low monthly premiums (as low as $22), $5,000 worth of accident insurance coverage is available with just a $100 deductible.

Prescriptions may also be troublesome because few people realize the total cost of their prescriptions with co-pay health insurance. Several strategies promise to cut prescription costs until an HSA balance has time to grow. Discount cards are readily available on the Internet. In addition, prescription drugs can be purchased online at amazing discounts from overseas providers.

Careful planning and HSA tax-free earnings are proving valuable for more employees. Back at the medical center, assistant trauma coordinator Emily Page has been won over by the advantages of high-deductible health plans and now equates her HSA with a 401(k) plan. In the three years she has invested in an HSA, she and her husband have been able to save almost $8,000. It’s that kind of success story that is fueling the move to high-deductible health plans and Health Savings Accounts.