Health Savings and Health Reimbursement Accounts
Health Savings Accounts:
Of late, Health Savings Accounts (HSA’s) have become a way in which employees receive a lower premium cost in exchange for higher aggregate deductibles, while employees deposit discretionary funds into a pre-tax savings account to cover co-insurance and other related medical expenses that may also include a wide range of options from dental expenses to fitness center fees. This lets the employee gauge their investment based upon their own unique situation, liquidity and wellness; which in effect allows a customizing of the contribution made toward their respective accounts, subject to a $6,250 maximum on a family contract or $3200 on an individual contract that yields a lower basic premium cost.
Health Reimbursement Accounts:
Health Reimbursement Accounts are similar to HSAs but are more prevalent and desired by employers offering group insurance to their employees. The benefit to the employer is that they can continue to offer the same deductible to employees while taking out a higher deductible program for lower premiums.
Employers can use the premium savings as a hedge “fund” to offset reimbursements to employees who exceed the employee stated deductible up to the high deductible limit established in the health plan with the insurer. This can certainly be considered a hybrid self-funded arrangement because the employer is assuming some portion of risk that a large portion of covered employees will not tap into the savings created by the employers to facilitate moving to a higher deductible program. In most cases, employers can achieve cost reductions in their health insurance programs because only 30% of employees will typically exceed $500 (a typical deductible) in any calendar year.