High Deductible Health Plans (HDHPs) and Health Savings Accounts (HSAs)
In today’s turbulent health insurance environment of ever-increasing premium costs, it’s difficult for businesses – particularly those small- to mid-sized – to afford even the most basic healthcare coverage for employees. This is evermore the case in the aftermath of the COVID-19 pandemic. According to various industry sources, average employer health plan costs will increase 6.5% in 2021 and 2022, topping the average annual 5% increase for these costs over the past decade.
To bend the cost curve of rising health insurance costs, many businesses choose a High Deductible Health Plan (HDHP) for employee coverage. These plans afford employers with significantly lower premium costs than HMOs, PPOs, POSs and other major group health plans – but employees pay considerably higher deductibles and other upfront, out-of-pocket costs before actual insurance coverage and benefits kick in. Average annual out-of-pocket employee costs for employer-sponsored HDHPs tops $7,500 for individuals and $15,000 for families.
Businesses have helped employees with these high out-of-pocket costs by offering a company-funded Health Savings Account (HSA) in conjunction with an HDHP. However, the total IRS-allowed annual contributions (employer + employee) to these accounts make, at best, roughly a 50% dent in those costs – plus there are government restrictions on what expenses those funds can be used for. While this scenario may afford employers with basic employee health insurance coverage that benefits the bottom line, it offers little compensation allure for key employees who drive a company’s profits and growth.
Research proves that top hires make job decisions based not only on salary, but also optimal healthcare benefits. These sought-after employees literally “shop” for health benefits provided by employers – and they seek coverage far beyond what an employer’s HDHP offers. There’s long been a highly competitive job market for such top performers, and COVID has exacerbated it.
An Affordable, Tax-Advantaged Solution
The ExecSelect™ health plan from Sankaty Light Benefits provides employers a solution to this increasingly costly health insurance environment and highly competitive workplace.
This fully insured health plan provides direct, typically tax-exempt reimbursement to key employees and their eligible dependents for virtually all healthcare expenses not covered by their employer’s primary health plan, including deductibles, co-pays and co-insurance. Plus, it covers a broad range of medical expenses rarely covered by most employer base plans – such as dental/orthodontic, vision, hearing loss, in-home nursing, psychiatric care, speech therapy, infertility treatment, substance abuse treatment and facilities, and a multitude of other medical services. Generally, if an expense is medically necessary and qualifies under Section 213(d) of the IRS Code, it is eligible for reimbursement. Plus, all premium costs are tax-deductible for employers.
Unlike an HSA or other consumer health account, ExecSelect™ Is not subject to ACA (Affordable Care Act) requirements, so it can be offered to select – versus all – employees at the employer’s discretion. Additionally, it is not a savings account: it provides true insurance coverage, value and benefits. What’s more, ExecSelect™ provides plan participants, at no added costs, with other valuable insurance benefits, including: AD&D coverage; worldwide 24/7 travel coverage; and even healthcare concierge and travel coordination services.
In effect, ExecSelect™ provides employers: an affordable way to majorly boost health plan benefits for key employees; a tax-advantaged workforce strategy that attracts and retains key employees; and a cost-effective means to differentiate their total compensation package from competitors.