In the current employment benefits industries, there are all types of approaches for ensuring coverage for the workforce while still keeping an eye on the company's bottom line. Benefits coverage is certainly an investment, providing peace of mind for employees and even a strategic differentiator for recruitment and hiring. At the same time, however, it's imperative that human resources leaders maintain their fiscal responsibility here and investigate all available opportunities to keep their healthcare costs down.
In this spirit, we're taking a look at level-funded insurance with health savings accounts (HSAs), including how this coverage works and the advantages it can provide for your company's healthcare spend.
The basics: Level-funding and HSAs
Before we get into the cost-savings benefits, it's important that healthcare coverage decision-makers have an understanding of level-funding insurance and how this fits in with a health savings account. Our own Triton Benefits & HR Solutions President and CEO Steve Rosenthal recently hosted an in-depth webinar on these topics, during which he explained:
How level-funding works
Level funded plans enable the company to pay preset, monthly level payments based on enrollment figures. Both the client company and benefits broker can view reporting data and assess the available surplus over the course of the year. After 15 months, a reconciliation takes place to ensure that claims don't exhaust the available funding surplus. Then, at 16 months, the company can receive a cash credit for the leftover available surplus, or an administrative fee credit for their portion of the funding surplus.
Level-funded plans are increasingly popular, thanks to their ability to offer the cost-efficiency advantages of self-funding with the reliability of a fully-funded plan. While a level-funded plan puts more of the risk on the employer, it offers the greatest opportunity for cost savings through lower claims and premiums.
How HSAs work
HSA enables companies to leverage pre-tax monies to support their employee health coverage. This includes as much as $3500 for individuals and $7000 for families, with the ability to rollover and accrue unused funds from year to year. However, these funds can only be utilized with an ACA-qualified high deductible health plan (HDHP) determined by the insurance carrier and filed with the state. HSAs can be used for deductibles and copays, prescriptions, out-of-network costs and other charges.
Setting up an HSA: Tax and savings benefits
In order to establish an HSA for the business' employees, a company must have a qualified HSA HDHP already in place. In addition, the company will need to reach out to a third-party administrator to enable core administration and benefit resources, as well as the ability to administer enrollment, communications and payments for the HSA.
Once the company has chosen this route and is working toward setting up the HSA, it's important to promote the benefits to employees. This includes pointing out advantages like:
- Employee savings through paying a low-level of medical contributions, thanks to the fact that the company supports the majority share of the HSA.
- Plan maturity for younger workers. As Rosenthal explained during the webinar, younger staff members won't be as impacted by the higher deductible, as chances are good that they won't need to rely as much on medical services. However, as this younger workforce ages and does need to leverage the plan, cash buildup will help with high deductible costs, as well as maintain low premiums.
- Contributions are pre-taxed and remain with employees for life.
Particularly in the wake of President Trump's executive order to support more transparency with healthcare service costs, HSAs are increasingly important and beneficial. Check out our 2019 Employee Benefits Benchmark Survey to learn more about current benefits package trends and see how your offerings compare.