HR & Healthcare Insurance Conversations

The Rising Cost of Healthcare

I must admit when I first looked at Healthcare Insurance options for my family at a former employer, before I became involved in Human Resources, I was a little freaked out and dismayed about the options presented at open enrollment.

Healthcare Insurance Option 1

The first option was to remain in the plan we were already enrolled in, however, the premiums for the upcoming year had a dramatic increase, itf I recall it was around 30% more per month. At the time we were starched thin as a family and I definitely was not getting a raise to cover the increase of this expense.

Healthcare Insurance Option 2

The second option was a High Deductible Health Plan, or HDHP. I noticed the monthly premium was quite a bit lower, but the deductible or out of pocket (several thousand dollars) seemed to be out of reach if something dramatic happened to my family and I worried about this.

HSA???

What I did noticeis that my employer offered a generous $1000 contribution to employees who switched to the HDHP, and this would be deposited into a Health SAvings Account, or HSA.
At the time, I did not know what na HSA was, I used FSAs in the past, but was unsatisfied by the ‘use it or lose it’ provision or trying to guess what might occur to myself or my family in the upcoming year.
Looking further into HSAs, I was intrigued:

  • there was no use it or lose it provision
  • contributions are tax deductible
  • and savings grow tax deferred as well.
  • If needed, the withdrawals used for qualified medical purposes was not taxed for qualified medical expenses

The other thing I came to realize is that an HSA can complement a 401(k). Man people know about 401(k)s and know to contribute at least enough to receive their employer match. This is a wise move to get ‘free money’ but there are normally strings attached, generally a vesting period.
Here’s a link I found discussing the benefits.

Retirement

Being a little older and perhaps somewhat wiser, I realize that healthcare expenses later in life is a major concern for many people, currently estimated to be $285,000 for couples by some studies. I realized that HSA funds could grow and compound if not used, and upon retirement, this could help with healthcare needs in my ‘golden years’ freeing up other funds from a 401(k) for other living expenses.
While the contribution limits seem ‘low’ at $7000 for 2019 for people with families under age 55. Let’s use some back of the napkin math assuming:
A 42 year-old-employee with a family, contributing $2500 a year with a $1000 employer contribution, an annual withdrawal of $500 for medical expenses and a 4% growth would have ~$115,000 upon retirement age.
In my opinion, HSA’s are not getting ‘enough press’ and it really should be a conversation that Human Resources has in more detail with employees. If you would like to have a conversation around creating messaging around healthcare options, or employee benefits in general, please feel free to reach out!
*Disclaimer – the content of this post is my sole opinion and is not be construed as legal, financial, or medical advice.

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