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Your cost-saving plan of the year: Health Savings Accounts

by on
in HR Management,Human Resources

Issue: The new Medicare law allows employees to set up tax-free savings accounts to cover uninsured medical costs.

Benefit: Setting up HSAs for employees could allow you to offer them less-expensive high-deductible health insurance, saving your organization thousands.

Action: Check the Web sites listed below to learn more.

2004 could be the year you save your organization a bundle on health care costs. How? By checking in to, and taking advantage of, the feds' Christmas present to employees: Health Savings Accounts (HSAs).

Tucked within the volumes of the Medicare Prescription Drug and Moderni-zation Act President Bush signed into law Dec. 8 lies a provision authorizing HSAs, which can lighten the heavy health care cost burden many employers are carrying.

What they are: Starting Jan. 1, people with relatively high-deductible health insurance plans can put aside up to $2,600 a year individually and $5,150 per family in tax-free HSAs to pay for upcoming health costs. Participants can set up the plans themselves or go through their employers. Employers can reap some tax benefits by contributing to the plans, as well.

How they work: Participants contribute to the plan, then make tax-free withdrawals to pay uninsured medical expenses. Even better, participants can "roll over" unused HSA contributions from year to year, unlike flexible spending accounts.

What's in it for you: Employers feeling the pinch of providing high-cost health care insurance for their employees can use HSAs as leverage to introduce low-cost high-deductible ($1,000 a year for individuals, $2,000 for families) plans.

If you're worried that dropping your current health care plan in favor of a high-deductible plan coupled with HSAs would cause employees to revolt, you can meet them half way: Your organization can make tax-deductible contributions (up to $2,600 for individuals, $5,150 for families) to employees' HSAs.

For more details, check out these Web sites:


  • U.S. Treasury Department fact sheet, www.ustreas.gov/press/releases/js1045.htm.




  • Coalition for Affordable Health Insurance, www.cahi.org.




  • BenefitsLink, www.benefitslink.com.


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