Recommendation tools drive adoption of HDHPs, HSAs

When employees can choose how to spend their employer-provided contributions, they spend more thoughtfully and show high overall satisfaction with their benefits portfolio. (Photo: Shutterstock)

As health care costs continue to rise and employers try to make sense of the complicated health care landscape, HR administrators and executives are searching for ways to control spending while also offering a benefits portfolio that helps them to attract and retain top talent. Increasingly, they are turning to high-deductible health plans (HDHPs) and accompanying health savings accounts (HSAs) to help employees cover their medical expenses and protect their wealth for the long term.

There are numerous advantages of HSA-qualified plans for employees, but perhaps what’s least understood by employees is the power of HSAs as a financial resource for retirement.  Dollars that accumulate in an HSA do so with some of the best tax protection available from the IRS. Contributions to the account under a limit are tax deductible, they grow in the account with no tax applied to the earnings, and as long as a participant uses the funds towards a qualifying health care expense, they receive a full tax deduction on the withdrawal as well.  As a result, a well-funded HSA can help a plan participant more feasibly retire before they are eligible for Medicare, since they can purchase lower-cost plans and use their HSA to cover out-of-pocket expenses.