High-deductible health care plans (HDHPs — also called consumer-driven health plans or CDHPs) that come with a savings account may be a viable option for your company — but how do you know if they’re the right choice, especially with so many health care plans out there? When weighing your options, a few key elements can indicate whether HDHPs are a good fit for your small business.
The monthly premiums for HDHPs are generally lower, but your employees have to cover all of their health care costs until they meet the deductible. These health plans have a deductible of $2,600 or more for a family, or $1,300 or more for an individual, according to Healthcare.gov. However, it is possible to combine an HDHP with a health savings account (HSA).
HSAs are available for anyone with an HDHP who’s younger than 65, according to CNBC. In 2017, individuals can save up to $3,450 a year in their HSA and families can save up to $6,700. Further, anyone 55 or older can save an additional $1,000.
HDHPs Save on Monthly Premiums
If you’re having trouble fitting health care coverage into your budget, an HDHP may work for you. Since the deductibles are high, the cost of your monthly premiums will be lower. A generous pretax health savings account can help offset this deductible. As an employer, you make tax-deductible contributions to your employees’ HSAs and they use the money for certain qualifying health care costs, including doctor visits and prescriptions.
HDHPs Can Be Offered as Part of a Menu of Choices
You don’t have to limit your business to offering only one type of coverage. In fact, you can offer a variety of plans to your employees, including a high-deductible plan with an HSA and one or two lower deductible HMOs or PPOs.
This gives your employees the freedom to decide if they prefer a higher monthly premium for more comprehensive coverage or a lower premium that comes with an HDHP. Employees who shy away from high deductibles won’t feel forced into that type of plan, but employees who prefer lower monthly costs will have that option.
They’re a Good Choice for Healthy or Young Staff
If your employees are generally healthy or young, then HDHPs make sense. The tax-protected health savings accounts can roll over from year to year. This means that if your employees stay healthy and don’t have to use the savings, they can build quite a big “nest egg” of sorts to help them when they get sick or injured, as Harvard Business Review reports. The HSA funds never expire, and they move with the employee, even if the employee changes jobs.
HDHPs Help Avoid the Cadillac Tax
In 2020, if current laws stay the same, a “Cadillac tax” will kick in, taxing rich health care plans by 40 percent, according to Benefits Pro. Some businesses are preparing ahead of time and choosing HDHPs now, which are less likely to be affected by this tax. It’s possible that by the time 2020 comes around, the tax will be delayed or changed — but until then, some businesses are building in fail-safes in the form of HDHPs.
High-deductible health care plans make sense for businesses that are trying to save money on monthly premiums. If your staff is young or healthy, or if you offer a variety of health care options, an HDHP is a welcome alternative.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
Stephanie Dwilson has extensive experience providing expertise on topics including health, law and marketing. She’s a science journalist published by Fox News, a marketing expert and an attorney with expertise in personal injury law. She’s also a small business expert featured by Businessweek and Millionaire Blueprints magazine and has worked as a marketing consultant for ministries and as a PR lead for one of the largest churches in America.