16
Employees are increasingly being offered more high-
deductible health-care plans, which are often accom-
panied by health savings accounts. According to a
late-
2012
report from consulting firm Mercer,
22%
of
employers now offer a high-deductible plan, and
16%
of workers are enrolled in such a plan. The larger
the employer, the more likely an
HDHP
/
HSA
com-
bination will be on the menu. In some cases, high-
deductible plans are employees’ sole health-care
options; at other employers, workers can choose
between a traditional health-care plan with a higher
premium and/or one with a higher deductible.
For workers who don’t have cash on hand to defray
health-care expenses, being forced into a high-
deductible plan can be a major bummer. Not only
could unanticipated health-care expenditures—and
correspondingly high out-of-pocket costs—derail
their budgets or force them to take on debt, but being
on the hook for high out-of-pocket costs also could
prompt them to delay attending to their health-care
needs altogether.
But for higher-income workers, a high-deductible
health-care plan can be a terrific option. For people
with few health-care expenses, the plans can be a
win from the get-go because they typically feature
lower premiums to compensate for the insured party’s
high out-of-pocket costs. (Of course, the opposite can
also be true: If one encounters a medical condition—
especially if it’s a rare health condition that is costly
to diagnose and/or treat—the cost savings of lower
premiums can quickly be swallowed up by high out-
of-pocket costs.)
However, the real benefit of a high-deductible plan for
higher-income workers isn’t so much the year-to-year
premium savings, which may or may not be offset by
higher out-of-pocket costs. Instead, the key benefit
is that participating in a high-deductible plan enables
you to invest in a health savings account. Such
accounts offer the only triple tax advantage in the
whole tax code: You contribute pretax monies to
the account, enjoy tax-deferred compounding, and
take tax-free withdrawals for qualified health-care
expenses. This “three-fer” and the fact that there
simply aren’t that many tax-advantaged savings
vehicles available are reasons why Morningstar.com
readers were so enthusiastic about their
HSA
s
when I queried them on this topic last year. (In the
interest of full disclosure, I’ll say that I’ve been a
happy
HDHP
participant/
HSA
owner for the past year
and recently reupped for this option as part of
Morningstar’s health-care plan.)
Roger Wohlner, a financial planner with Asset
Strategy Consultants in Arlington Heights, Ill.,
believes that the
HDHP
/
HSA
combination can be
beneficial on several levels. “The difference in
premiums alone generally makes a high-deductible
plan with an
HSA
a good deal. The
HSA
option
also provides a ‘piggy bank’ if needed to meet the
deductible and can serve as a great tax-deferred
savings vehicle.”
Sue Stevens,
CEO
of Stevens Wealth Management in
Deerfield, Ill., also likes
HSA
s as tax-deferred savings
vehicles and encourages clients to take advantage
of them. She notes, however, that “more clients could
be taking advantage of them, but they don’t really
understand how they work.”
Here are some common objections to
HSA
s as well
as a discussion of whether those objections are valid.
Objection
1
| Aren’t
HSA
s “use it or lose it”?
No. People often confuse
HSA
s with flexible-spending
accounts, which until recently were “use it or lose
it”—meaning that the money couldn’t be rolled over
from one year to the next—unless plans allowed
employees a grace period. Unused monies in
HSA
s,
by contrast, always automatically roll over from
year to year.
The Beauty of HSAs
Portfolio Matters
|
Christine Benz
