As health insurance prices continue to rise, contractors may want to consider an option called health savings accounts (HSAs). They're no cure-all, but some companies have successfully switched to this lower-cost alternative from PPOs and HMOs.
HSAs are tax-sheltered savings accounts for medical expenses. They're set up in tandem with a high deductible health insurance policy: $1,000 minimum for individuals, $2,000 for a family. The policy also must have maximum out-of-pocket expenses of no more than $5,000 per year for an individual and $10,000 for a family.
All annual contributions are limited to $2,600 for individuals, $5,150 for families. Withdrawals for medical expenses are not taxed. The money in the account belongs to the employee and doesn't have to be used by the end of the year.
For employers, HSAs offer lower costs and additional flexibility. Gibson Roubal Construction in Lake Leelanau, Mich., opted for HSAs. Office manager Jana Kiessel says the company is paying less now than it was for Blue Cross Blue Shield three years ago.
From the employee point of view, Kiessel says, “it's a good deal if you don't incur a lot of medical expenses in the first few years. If you're healthy you can build up a nice cushion for later medical expenses and theoretically never have anything come out of pocket.”
If the goal is to cut costs, HSAs will, says Paul Fronstin, senior research associate at the nonprofit Employee Benefit Research Institute. There are, however, other productivity questions, Fronstin says.
“Will people perceive it as a compensation cut? Will there be an effect on recruitment and retention? There is no way to know the overall effect.” —Diane Kittower. This article originally appeared in REPLACEMENT CONTRACTOR.
Source: Mercer Human Resource Counsiling
