More and more businesses are offering workers, and their dependents, High Deductible Health Plans (HDHPs) as an alternative to traditional programs with low deductibles. Participation in these programs rose by 7% in 2011, and is on track to hit double-digit growth this year. According to the Employee Benefits Research Institute, HDHPs might become the dominant type of employee health care benefit plan as early as 2014.
It's easy to see why: In return for paying larger annual deductibles (and out-of-pocket medical expenses up to $3,000), participants can slash their premiums dramatically -- and invest these dollars in Health Savings Accounts (HSAs), which they can use to accumulate retirement funds exempt from federal taxes. That's a powerful incentive in today's uncertain economy.
HDHPs give your employees "skin in the game." Because they'll have to pay their medical bills themselves until they meet their deductible, they tend to evaluate health-care providers and services carefully, shopping to meet their needs, rather than being shoehorned into a standardized cookie-cutter plan. What's more, participants have a financial motivation to reduce health-care expenditures by taking better care of themselves through weight-loss or stop-smoking programs, gym memberships, dietary changes, etc. Some plans offer preventive-care "wellness benefits," such as health-risk assessments, free of charge.
However, before you offer your employees an HDHP, bear in mind that:
- These plans aren't cost effective for people with chronic health problems.
- Some participants try to save money by postponing or avoiding the care they need.
- Workers in lower-income brackets might not earn enough to benefit from the HSA tax breaks.
For a complimentary review of how HDH plans can benefit you and your employees, please get in touch with us.