A health savings account (HSA) plan can be a great solution for small business employees. But helping them understand why it may be a better choice than traditional health coverage might require a little education. Not everyone knows what a health savings account is, and others may not quite grasp all the benefits the account can offer. Here’s a look at how to encourage your employees to use a health savings account.
What’s an HSA?
A health savings account holds employees’ tax-deductible contributions that can be used for current and future medical expenses. Employers often contribute to these accounts, too. HSAs are only available to employees who have high-deductible, HSA-eligible plans with at least a $1,300 deductible for individuals and approximately $2,600 for families. These accounts also have contribution limits. For individual coverage, employees and their employers can contribute up to $3,400 a year total, with an additional $1,000 if the person is 55 or older. For family coverage, this increases to $6,750 a year. The funds must be used for out-of-pocket medical expenses, deductibles or copayments, else you’ll face taxes or a fine.
Why Should Employees Use an HSA?
The best way to encourage your employees to use HSAs is by educating them about all the benefits. Here are some of the benefits you might want to talk about:
- Used with a health plan that has a low-cost monthly premium;
- HSAs roll over from year to year;
- Employees’ contributions are tax-deductible;
- As long as it’s used for qualified reasons, money taken out of an HSA isn’t taxed as income;
- Qualified reasons even include deductibles, vision and dental care;
- Employees can use the money for non-medical purposes in an emergency, with a tax and a fine, and;
- The plans are portable and move with the employee.
In addition, the savings often work out in favor of a health savings account over a traditional plan, according to The Finance Buff. Employees may think it’s better to pay more per month on a health plan’s premium so they can get a lower deductible. But in many cases, the lower cost of a monthly premium — combined with an employer’s contribution to the account — covers so much of that higher deductible that employees end up saving money with HSAs.
Why Are HSAs Good for Your Business?
As an employer, why would you want to encourage HSAs? These accounts, in conjunction with high-deductible plans, can save you money in the long run. If you’re covering part of your employees’ monthly premiums, you’ll pay less per month. In addition, anything you contribute to a health savings account counts as a business expense. And anything your employee contributes is pre-tax for you, too, Spark explained. Employees will also be more health-conscious as they watch closely how they spend their account’s money.
In general, an HSA can be a great option for both employer and employee. The key is helping your employees understand how they can have all these benefits and still get a great health plan.
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 a non-practicing attorney with experience in personal injury law. She’s also a small business expert featured by Businessweek and has worked as a PR lead for one of the largest churches in America.