As healthcare costs continue to rise throughout the country, many employers are looking for affordable ways to offer health coverage to their employees. If you run a business that wants to provide health coverage while keeping costs low, here are four different accounts your business can make available to employees. Each one is commonly referred to with an acronym.
HDHP
An HDHP is a high-deductible health plan, which means it's a health insurance plan that comes with high out-of-pocket expenses for employees. Before the plan will begin to pay for covered medical services, employees must first have bills that meet the deductible amount they're required to pay. If employees' bills don't reach this amount in a year, the policy won't pay.
This type of health plan was specifically designed to provide catastrophic health insurance for major diseases and injuries without increasing premiums unnecessarily. Because there's a high deductible that must be met, premiums for both employers and employees are kept low.
HSA
Special provisions in federal laws allow HDHPs to be combined with HSAs, which are health savings accounts. A health savings account is a tax-advantaged account that employees put their own money into. That money can be invested and saved year after year, and employees don't pay taxes on what they save as they eventually use the money for medical expenses.
By providing a tax-advantaged savings account, an HSA offsets the potential downside of an HDHP. While employees might have higher out-of-pocket expenses in any one year, they can save up year after year.
HRA
HRAs function similarly to HSAs in that money is invested into these accounts without taxes being taken out. As long as the money is eventually used for medical expenses, no taxes are assessed on the funds. The difference between an HSA and an HRA is that the latter is funded by an employer rather than employees.
An HRA provides your business with another way to efficiently give employees funds that they can use to cover healthcare costs. Funding this type of account might be cheaper than paying higher premiums for a more robust health insurance plan, and an HRA gives employees more flexibility on how they use the funds.
FSA
FSAs, or flexible spending accounts, are another employee-funded account that comes with tax benefits. These accounts aren't intended to provide long-term growth like an HSA can. Instead, they help employees save on this current year's expenses by not assessing taxes on what's put into the account. FSAs must be used each year.
To learn more about group health insurance plans, contact a provider near you.
Share