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Why HSAs Are a Win-Win for Everyone
SavingsWith health care costs escalating, it is rare to find a solution beneficial to all, but this is the case with Health Savings Accounts (HSAs). They are a form of consumer-directed health coverage that combines a tax-free savings account for medical expenses with a high-deductible health plan. HSAs are designed to reduce the total cost of health care for employers and employees, and we outline how this is possible below.

Why HSAs Are Good for Employees

An HSA is effectively a personal savings account used to cover your medical bills. The money deposited into the account is not taxed, and you are in control of the cash instead of your employer. You need a special type of insurance called a high-deductible plan to be eligible for an HSA.

The idea behind HSAs is that people will be more sensible with their health care dollars when it is their cash being invested. Additionally, health care providers are competing for business and are forced to drop their rates. An HSA is a good idea if you are in generally good health and want a nest egg for the future or you are nearing retirement and are looking to offset future costs. Here is a quick overview of why an HSA account is a winner for employees:

  • You have total control of the amount you wish to invest.
  • This means you can shop around to find the best-value services.
  • While your employer can also contribute, you still own the money and can take it with you even if you leave your current job.
  • Unused money at the end of each year continues to get rolled over into the following year.
  • The money you pay into the account is tax-free.

Why HSAs Are Good for Employers

The Wall Street Journal claims big businesses spend an average of $6,000 per year on health insurance for each employee. Health care costs have risen by an annual average of 15 percent for the last five years, and the cost is so unsustainable that almost half of small businesses provide no health care coverage at all.

Employees pay just 16 percent of the cost of single insurance policies and 28 percent of the cost of family policies, so HSAs offer employers the chance to save a fortune on their health care expenditures. Here is an overview of why an HSA is so welcome for employers:

  • Employer contributions are exempt from payroll taxes.
  • High-deductible insurance policies.
  • Guarantees health insurance for employees.
  • Ensures employees become more responsible with their health care spending.
  • Employers can still contribute, but even a reasonable contribution is far below what they currently pay.
  • Contributions are tax-free and not included in gross income, which equals happier employees.

Small firms without medical plans should definitely be looking to encourage employees to open HSAs. If you want to keep your staff happy and productive, make sure they have the peace of mind that health insurance brings.

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