Tax Day in the U.S. is anticipated by those receiving refunds; dreaded by those who owe. April 15 is a national touchpoint that creates an opportunity to promote the multiple tax advantages of a health savings account (HSA).

HSAs make sense

When coupled with a High Deductible Health Plan (HDHP), an HSA is a great choice for many participants.* Some of the benefits of an HSA include:

● Affordable. HDHPs have lower premiums and higher out-of-pocket costs. HSAs make these plans work.
● Flexible. Participants have more control over how they spend their healthcare dollars on a variety of healthcare expenses such as dental, vision, and alternative medicine.
● Portable. Participants own their HSA, allowing them to keep their savings when they change jobs or retire.
● Valuable. Participants can build equity because an HSA acts as a long-term savings vehicle. (More so if employers contribute to participants’ HSAs.)
● Deductible. HSAs allow participants to save pre-tax dollars on healthcare expenses, reducing their taxable income, which results in tax savings.

*Depending on individual circumstances and changes in tax laws, there could be limitations on and disadvantages to contributing to an HSA. Employers should encourage participants to consult a qualified financial advisor about the potential impact of participating.

HSAs make cents (and dollars)

There are more advantages than are commonly understood. Participants can benefit from these three and more:

1. There is an April 15th loophole that allows participants to retroactively fund their HSA after they know their qualifying expenses from the previous year.
2. Adult children who ARE covered under a parent’s health plan AND who are NOT claimed as a dependent on a parent’s tax return, can fund their own HSA.
3. Qualifying expenses can be reimbursed years later. And HSA qualifying expenses are defined more broadly than an insurance company’s ⏤ ranging from aspirin to acupuncture (with a receipt). These HSA reimbursements are not taxed, unlike withdrawals from a 401(k), making HSAs potential rainy-day accounts.

Piggybacking on tax season messages

Tax season creates a timely opportunity to remind participants of the tax advantages that a health saving account benefit offers them.

Below are a few ideas to help get you started.

● Use tax season as a natural segue to a discussion of the tax benefits of an HSA, piggybacking your internal marketing efforts on other media messaging about tax deadlines.
● Remind potential participants that they have until April 15 of the current year to fund HSA dollars that can be used for qualified expenses incurred the previous year.
● Focus on a one or two-week campaign around April 15th for maximum impact, but don’t limit efforts to educate about the benefits of this valuable, but often overlooked, benefit all year long.

Need more ideas or help executing the ideas above? Contact Smith Communication Partners; participant communication is what we do.

HDHP/HSA: An Overview 

Since its inception in 2004, the adoption rate of the High-Deductible Health Plan (HDHP) has been growing. Today, approximately 30% of covered workers in the United States participate in an HDHP. Originally offered as an alternative to PPOs and HMOs, the HDHP was intended to incentivize consumer behavior in healthcare. Its plan design, which allows it to be paired with a tax-advantaged Health Savings Account (HSA), was distinct from existing medical plan options and the name alone made it easy for HDHPs to stand apart.

The Challenge of Naming a Plan

As acceptance has grown, so have the options. Employers are increasingly adding not just one HDHP, but multiple HDHPs. In these cases, quickly distinguishing one HDHP option from another through use of a descriptive plan name can be challenging. 

This is due, in part, to low understanding among employees of key medical plan features:

• Premium: the amount the employee pays for the coverage each month
• Deductible: the amount the employee pays for covered services before their insurance starts to pay
• Copayment: a fixed dollar amount the employee pays for certain healthcare services
• Coinsurance: the employee’s share of the costs of a healthcare service once coverage kicks in 
• Out-of-Pocket Maximum: the most the employee pays during the plan year before the plan starts to pay 100% of the allowed amount

Generally, higher deductibles and out-of-pocket maximums result in lower premiums and multiple HDHPs are distinguished from each other by these amounts (rather than by features such as access to out-of-network providers).  

Comparing these multiple plans can be challenging for employees because there are many variables must be compared against one another.

• How much will this cost me each month?
• How much health care will my family use?
• How much risk am I taking over the course of the year?
• How much will my medications cost?
• How much can I save in HSA over time?

These are not trivial one-to-one cost analysis. They are highly individualized and impactful for most employees’ health care budgets. Therefore, finding simple, easily understood names for the plans is also difficult and complicated.  

Common Approaches to Naming HDHPs

Metallic Plans (Platinum, Gold, Silver, Bronze)

This is likely the most familiar option, as it is employed by healthcare.gov. Similar to how they are used in the Olympics (or by jewelers), these metals distinguish plans by actuarial value with Platinum being the highest followed by Gold, Silver and Bronze. 

Metallic names seem to offer an immediate recognition of value. (Would you rather have an ounce of bronze or an ounce of Gold?) However, metallic names are problematic, because it’s not necessarily clear to the employee what that value means. 

It could easily be inferred that Platinum plans are most expensive, but that’s only true with regard to premiums. Yet, high premiums may be a waste of money for people who don’t use very much health care.  It could also be inferred that Bronze plans are worth less, but they could be a better deal for the employee based on their use of health care, and a greater ability to save money in an HSA. 

Deductible Amounts

Including the deductible amount in a plan’s name immediately conveys useful information about the underlying plan. However, as mentioned above, employees might not necessarily understand this concept. For example, some employees might be willing to pay higher premiums in exchange for a lower deductible because they may assume a lower deductible means “more” or “better” coverage.

Some employers use only the individual deductible in the name (which can cause confusion for those who choose family coverage), and some use both the individual and family deductible, (which can result in long or clunky names).

• Single Deductible Approach: HSA $1,500 and HSA $3,000
• Both Deductible Approach: HSA $1,500/$3,000 and HSA $3,000/$6,000

Comparative Descriptors

Another approach is to use descriptive terms that attempt to convey how the plans are different. However, these approaches have similar pros and cons as the metallic names; they have inherent meanings but might mislead employees.

• HSA Premium and HSA Standard 
• HSA Plus and HSA 
• HSA High and HSA Low 
• HSA and HSA Core 
• HSA and HSA Basic
• HSA and HSA Value 
• HSA High Use and HSA Low Use

Non-comparative Descriptors

Another approach would be to use descriptors that merely indicate the two options are different without implying any comparison. These labels have no inherent meaning. Employees would have to learn what each means over time.

• HSA Blue and HSA White
• HSA 1 and HSA 2
• HSA A and HSA B

Conclusion

There is no right or wrong approach to naming HDHPs. The metallic names, though simple and easy to understand, are imperfect. Other comparative and descriptive methods also fall short. Simplicity cannot be the ultimate concern. 

Employees need to understand the features of their health plans through effective communication and tools that help them model and compare the offered plans against their individual circumstances. Any name will work, if it is properly supported with information employees can usefully access and apply.