In recent years, employers and self-employed Americans have been migrating to high-deductible health plans (HDHPs) but, if they are not attached to a health savings account (HSA), they can end up costing the plan participant more than they can afford and create health problems for them down the road.

HDHPs typically have reduced premiums in exchange for the employee taking on a higher deductible for health care expenditures. The average person enrolled in an HDHP saves 42% in annual premiums, compared to those enrolled in preferred provider organization plans, according to research from BenefitFocus.

But in order to afford paying those deductibles, an attached HSA can help them sock away funds pre-tax to ease the burden.

That’s because HDHPs may leave families facing at least $2,700 in potential deductibles, and up to $13,500 in out-of-pocket medical expenses per year. In 2018, the average HDHP deductible was $4,133 per year for family coverage and $2,166 for single coverage.

For some people, this can pose a problem because:

• 60% of Americans don’t have $1,000 in emergency savings.
• 44% would have trouble meeting an unexpected $400 expense.

As a result, many HDHP beneficiaries find themselves putting off care, rationing their medications, or going without altogether. But this often leads to even greater expenses down the road, lost work, productivity losses – and even disability and death. Besides the toll it takes on the employee, their work for you can also suffer.

You can do your part to help your workers avoid this situation by providing an attached HSA, which can be crucial in helping them meet their medical bills.

How HSAs work

HSAs are one of the most tax-efficient savings vehicles in the tax code, and a potent tool for both insurance planning and retirement planning.

These tax-advantaged savings accounts are specifically designed to help people pay their health insurance deductible.

• Contributions are tax-deductible. What’s more, if you offer the benefit via a Section 125 cafeteria plan, HSA contributions aren’t subject to Social Security and Medicare payroll taxes.
• Balances accrue tax-deferred. And if participants don’t need to tap their HSA money for health care expenses, once they turn age 65, they can withdraw that money for any reason, penalty-free. All they pay is income tax.
• Withdrawals to cover qualified medical expenses are tax-free.

What to do

Employers and plan sponsors should work to bridge the gap between deductibles and what employees can actually afford. Otherwise, the short-term saving is likely to be overwhelmed by absenteeism, presenteeism and future medical costs. You should:

• Consider contributing to or matching employee contributions to health savings accounts.
• Beef up flexible spending account benefits to help workers with current health issues, and to fund preventative care such as eye exams – which can help detect diabetes.
• Offer critical illness insurance.
• Implement or expand workplace wellness programs. A study from Health Affairs found that well-executed wellness programs generate a return of $3.27 per dollar invested.
• Invest in worksite vaccination and screening programs.
• Speak with your health insurance carrier or us about using wellness dollars designed to help employees reduce long-term medical costs.

A new study has found that people enrolled in high-deductible health plans (HDHPs) actually are more likely to consider costs and quality when considering non-emergency care.

The 14th annual “Consumer Engagement in Health Care” study by the Employee Benefits Research Institute and market research firm Greenwald & Associates surveyed 2,100 adults, most of whom receive health coverage via their employers.

The survey found that people enrolled in health plans with a deductible of at least $1,350 for self only, and $2,700 for families, were more likely to take costs into account when making health care decisions.

Evidence of cost-conscious behavior:

• 55% of HDHP enrollees said they checked whether their health plan would cover their care or medication prior to purchase, compared to 41% in traditional health plans.
• 41% of HDHP enrollees said they checked the quality rating of a doctor or hospital before receiving care, compared to 33% of those in traditional plans.
• 41% of HDHP enrollees asked for a generic drug instead of a brand name drug, compared to 32% of traditional plan enrollees.
• 40% of HDHP enrollees talked to their doctor about prescription options and costs, compared to 29% of traditional plan participants.
• 25% of HDHP enrollees used online cost-tracking tools provided by their health plans to manage their health expenses, compared to 14% of people in traditional plans.
• HDHP enrollees also were more likely to take preventive measures to preserve health, including enrolling in wellness programs.

That said, the study did find some negative behavior among HDHP enrollees as well, including that 30% of HDHP enrollees said they had delayed health care in the past year because of costs, compared to 18% of traditional plan participants.

What you can do

In order to help HDHP enrollees get the most out of their plans, it’s recommended that their employers also offer health savings accounts.

This can help them pay for services that are not covered until they meet their deductible. Employers can help by matching (fully or in part) employees’ HSA contributions. This encourages them to participate.

Employers should also push preventative care. The Affordable Care Act requires all plans to cover a set of preventative care services outside of the plan deductible. Unfortunately, many people don’t know that these services must be covered by insurance with no out-of-pocket expenses for the enrollees.

Some employee benefits experts are recommending that employers tie the amount of premiums employees are required to contribute to how well they comply with preventative guidelines.

Non-enrollment in HSAs

These are the reasons employees cite for not enrolling in their company’s HSA:

• Do not see any advantages: 57%
• Do not have enough money to contribute to the account: 24%
• Their employer doesn’t contribute to the account: 10%
• Did not take the time to enroll: 8%
• Do not understand what the HSA is for: 6%

The key to getting your staff to take advantage of the tax-savings feature of HSAs is education. You should make sure all of your eligible staff understand how they work.

And if you are not currently contributing some funds to their HSAs, now might be the time to consider doing that.