Health savings account the way to go for state employees

This year, employees of the state of Utah will be able to join millions of Americans making the switch to a consumer-driven, market-oriented plan by signing up for a high deductible health plan with a health savings account (HDHP/HSA). For the last couple of years, the Public Employee Health Plan administrators have worked with experts in HDHP/HSA plans to come up with an offering that is both fiscally sound and still highly attractive to state employees. The plan this year meets both of those goals. In fact, the plan is not only better than previous HDHP/HSA offerings from PEHP, it's also better in many ways than PEHP's more traditional insurance offerings.

For starters, a state employee will pay $685 out of pocket per year in premiums for the traditional family plan. On the other hand, the HDHP/HSA plan is free to the employee. Once more, the state will be putting $2,340 into a health savings account per year per family (individuals in the state HSA plan receive roughly half of the premium savings and half of the HSA contributions as the families). This means that any employee who opts for the HDHP/HSA plan is already $3,025 ahead of the employee who chooses to stay with the traditional plan. Any employee who spends his or her money wisely and doesn't go over the $2,340 limit gets to keep that money in their HSA for any future health needs or he or she will be able to withdraw from that account after they retire similar to a 401(k).

If, on the other hand, an employee has an expensive chronic condition or has a catastrophic injury or illness, the HDHP/HSA is still the better way to go. Both the traditional and the HDHP/HSA plan have an out-of-pocket maximum of $7,500, but any money the employee with the HDHP/HSA spends from the HSA will most likely count towards the deductible whereas the $685 that the traditional plan holder spends on premiums does not count. So when both employees reach that $7,500 out-of-pocket maximum, the HDHP/HSA holder has really only spent $5,160, while the traditional plan holder has spent $8,185. Most striking is that the out-of-pocket expenses by the person in the HSA plan can be tax-free while the expenses in the traditional plan are often taxed.

Almost any way you look at it, the employee purchasing the HDHP/HSA plan is going to come out ahead. And, that doesn't even take into account the fact that the money in that HSA has far fewer restrictions on how it is spent than insurance companies generally put on any claims that they pay.