Anxious? High-Deductible Plan?

It’s that time of year again. Open enrollment for those covered by Concordia Health Plans. For many, the words “health care plans” and “high-deductible” creates anxiety. The employee wonders: Which plan will take care of my family best and how can I pay for it? The employer wonders: Which health care spending tools is right for the employee?

Why High-Deductible Plans?
The general trend in health insurance plans is toward high-deductible plans. The alternate name for these plans: “consumer-directed plans.” There’s reason for this. It is to inspire individuals to own their own health consequences such as make healthy choices (when eating and exercising) and to make good financial choices when spending health care dollars.

Consider Which is Best: the HSA or HRA
Churches can elect to use either a “Health Reimbursement Account” (HRA) or “Health Savings Account” (HSA) to pair with a high-deductible health insurance option. Many church leaders think electing the HRA is the best way to keep the church’s costs down. However, by doing this, they are not incenting the worker to “own their health outcomes.” In other words, just like the old low-deductible plans, the employee still doesn’t experience the need to effectively save and plan for effective health care usage. On the other hand, if the employer elects the HSA both they (as the employer) and the employee can contribute. The HSA creates the possibility for the employee to plan and save for health expenses. The employee can save money from their paycheck “pretax” and the money is NOT TAXED when spent on eligible health care expenses. It creates an opportunity for the employee to pay for common and major medical expenses with dollars that are never taxed. Compare the HSA to a 403B (retirement savings plan). Retirement savings in a 403B are saved pre-tax but taxed when withdrawn in retirement. It just makes sense to optimize the HSA opportunity for the employee. It represents a huge benefit for the employee now and in the future. I can’t underscore this enough. The employee owns the account and can build up savings for major medical events both in the near term and far into retirement. This is the intent of these plans! (The retired employee may no longer contribute to a HSA but they can spend their HSA money over their years in retirement.) The IRS website has a listing on their site for eligible medical expenses and it’s extensive.

Regarding the HRA
The HRA enrollment contract requires the employer to elect a level at which they will reimburse the employee for health related expenses. Some employers are choosing the most restrictive reimbursement option of the three available. The three options are: Option 1, “deductible reimbursement,” Option 2, “deductible, copays and coinsurance” and Option 3, “deductible, copays, coinsurance and drug coverage.” If the employer elects option #1, they might, depending on the circumstances, be transferring most of the high-deductible cost to the employee. Option 2 or Option 3 could be elected to better keep the worker “financially whole.” But regardless of this, in my opinion the HSA is the better choice between the HSA and HRA.

A lot of anxiety has been expressed on the part of workers regarding the high-deductible plans. It doesn’t need to be this way. Employers can, in my opinion, do a better job “pairing” either the HRA/HSA with their high-deductible health insurance plan. There are more details to know but I can’t discuss everything in this blog.

Please call me or your CPH representative for more information.

By: Linda Hagge, CPA
Texas District Treasurer

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