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A Spotlight on HDHPs
As the name indicates, the central feature of an HDHP is the high deductible.
For 2015, a "high" deductible is defined by the IRS as having an annual
deductible of at least $1,300 for single coverage, and $2,600 for family
coverage, with respective maximum out-of-pocket limits of $6,450 and
$12,900. These figures apply to standard HDHPs, which means they are
accompanied by either a health savings account (HSA) or a health
reimbursement account (HRA).
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No Cold Turkey
Most employers willing to give the HDHP design a shot don't go cold turkey by
offering only this plan. Some ease into it. A 2014 study by America's Health
Insurance Plans Center for Policy and Research showed that among employers
who already offered high-deductible plans as one option, about one-third had
decided to make an HDHP their exclusive plan for 2015.
Small employers may not have the luxury of offering multiple plans. So for
them, switching to the HDHP model may involve a leap of faith. As part of the
planning process, employers who take that leap need to decide whether they
will contribute to the accompanying account, which again, is either an HSA or
HRA.
Few employers are choosing HRAs, because most consider these accounts to
violate the spirit of the consumer-empowering HDHP. Actually an HRA is not a
true account, but more of an accounting device, which involves the employer
giving a dollar amount of credit to employees. Employees can use the credit to
offset some health expenses, as well as a portion of their contribution to health
plan premiums. HRA funds can accumulate, but do not pay interest.
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HSAs
Unlike health reimbursement accounts, HSAs are true accounts and are
owned by employees. The maximum that can go into an HSA in 2015
(combining employee savings and employer contributions, if any) is $3,350 for
single coverage and $6,550 for family plans.
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The Employee Benefit Research Institute reported that last year about twothirds of employees in high-deductible plans received employer contributions
to their accounts. Among small companies, the average employer contribution
levels are greater, possibly because the deductibles tend to be higher than
they are for larger employers. However, overall employer contributions seem
to be on the decline. In 2014, these contributions dropped an average of 10%
below the previous year, possibly as HDHP sponsors seek to offset rising
premiums.
Whether a high-deductible health plan would be beneficial to your
organization requires an analysis of multiple factors, including current plan
design, employee demographics and competitor offerings.
HDHPs are not new. But because these plans have a track record of controlling
expenditures in a health care environment of rising costs it's likely that
many more employers will be giving them closer scrutiny in the future.
Consult with your employee benefits adviser to help determine if HDHPs are
right for your company.
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