3 Tips When Switching to a High-Deductible Health Plan
January 9, 2018
Choosing the right health plan and benefits offerings for your employees is key to recruitment and retention. If you offer a High-Deductible Health Plan (HDHP) or have recently been thinking about making the switch, you know that these plans are a great way for you and your employees to save money on health premiums. And, by offering a Health Savings Account to pair with the HDHP, your employees can invest pre-tax dollars to cover the costs of their higher deductibles.
When done correctly, the move to HDHPs can produce big savings for everyone. What you might not know is how to capitalize on a few ways you can encourage and grow employee enrollment in your HDHP and HSA offerings – which is where we come in! Here are a few tips to have the most success with your HDHP.
Offer an HSA Employer Contribution
Building a Health Savings Account nest egg is important for participants to cover the upfront costs that come with having higher deductibles. Often times, participants set a goal in their first year with an HDHP of putting aside enough money to cover their deductible. Of course, that goal is much easier to achieve with some help. A financial incentive in the form of an employer contribution can be just what employees need to encourage them to build up their account balance.
Among Discovery Benefits clients, we’ve found that an employee is 23 percent more likely to enroll if his/her employer offers a contribution. When to make that contribution (on the employee’s first day or after 90 days) and how much you contribute is all up to you! Our average client contribution to participant accounts is just over $900.
Keep in mind that employer contributions into employee HSAs are tax-free, and employee contributions are exempt from income tax, so their contributions won’t count against your FICA taxes. To sum it up, employees save on pre-tax dollars when they contribute, and so do you!
Offer an HSA Employer Match
Your employees can grow their funds quickly if you offer to match a certain dollar figure or percentage of funds contributed. Employer matches are meant to help establish good habits, so consider contributing or matching higher amounts in the first year or two of offering the HDHP and HSA, then reducing that amount in later years.
How much is the right amount or percentage to match? We suggest consulting an actuary, who specializes in analyzing statistics and determining risk/reward in insurance decisions.
Offer HSA Advance
HSAs are a great benefit, but it can be intimidating to build up a balance from $0. That’s why we developed HSA Advance.
When you offer HSA Advance, your participants can borrow from a ready reserve of future contributions to pay for qualifying expenses before they’ve built up their balance. For your protection, you’re allowed to set limits on these advance amounts, and the system will make sure all future contributions by the participant go to pay back the borrowed funds first before they can accrue a balance. It’s a great way to help your employees get a head start with their accounts.
Want to learn more about our HDHPs and HSAs? Watch our video on the benefits of offering this benefit to your employees.