Is High-Deductible Insurance Right for Your Employees?

One of the most important and worthwhile things that an employer can do for its employees is select a health plan that will offer the maximum benefits for their lifestyles and health needs. A high-deductible health plan (HDHP) usually has lower premiums and higher deductibles than a traditional health plan. It also allows members to visit network providers without a referral and non-network providers (PPO plans only) at an out-of-network benefits level.

Here’s a quick overview of high-deductible health plans, including EPO and PPO plans:

• Primary care physicians and referrals are not required
• No cost for preventive health care services (including annual physicals and in-network screenings)
• Option to see non-participating providers (PPO only)
• Access to national network of more than half a million providers
• Worldwide emergency coverage

Employers are Turning from Traditional Plans to HDHPs

According to a recent survey on value in health care, it appears that more and more companies – both large and small – are choosing HDHPs as a primary option for employees. Generally, a high-deductible health plan is paired with a health savings account (HSA). An HSA is owned by the individual (as opposed to a health reimbursement arrangement, which is an employer health benefit plan sanctioned by the IRS) and is used to pay for qualified medical expenses (e.g., doctor visits, prescription drugs, dental care, and some medical supplies). Funds remain tax-free as long as they’re used for these expenses. About two-thirds of employers that offer HSAs as part of their health plans contribute money to those accounts.

Other funding account options include health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs). An HRA is a tax-favored, employer-funded account used to pay for medical expenses not otherwise reimbursed by the employer’s health plan, such as copayments and coinsurance, prescriptions, and dental and vision expenses. An FSA enables you to put money aside from your paycheck on a pre-tax basis to spend on health or dependent care expenses in the coming year. Learn the differences between HSAs, HRAs and FSAs.

Many people are finding that an HDHP is more cost-effective than the annual premiums on traditional family health insurance plans. One way HDHPs save money for both companies and employees is they encourage healthy behaviors. While traditional plans could cause some employees to increase out-of-pocket spending, an HDHP plan requires them to compare cost and quality to make their health care choices. This cost-consciousness with respect to health care is beneficial to the workers and the companies alike.

Why Choose a High-Deductible Health Plan for Your Employees?

Remember: Healthy employees are productive employees. The more you can do to increase employee wellness, the more your bottom line will be positively affected. Here are some other reasons why a high-deductible health plan, in conjunction with a health savings account, might be a good option for your business:

1. When employees use HSAs, they are:
   • 50 percent more likely to ask about costs
   • 30 percent more likely to get an annual physical
   • 25 percent more likely to pursue healthy behaviors
   • 20 percent more likely to comply with proscribed treatments
   • Three times more likely to choose less expensive health care options

2. Help your employees save for retirement. Most people aren’t saving enough. Medical expenses will be a huge part of retirement planning, and an HSA can help. When someone turns 65, an HSA can be used without tax penalty for non-medical and previously ineligible medical expenses like Medicare Supplemental insurance.

3. Chances are you can purchase a high-deductible health plan for less than a traditional health plan. If you can pass along some of those savings to your employees’ HSAs, you are probably offering your workforce a better-quality benefits package.

CDPHP health plans come in all different shapes, sizes and configurations. Finding the best option for your business – and your employees – will benefit everyone in the long run.

References: Kaiser Health News, Towers Watson, McKinsey & Company

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