Title: TAX AND OTHER IMPLICATIONS OF TRADITIONAL HEALTH INSURANCE PLANS VERSUS HIGH-DEDUCTIBLE HEALTH PLANS
Abstract: INTRODUCTIONFor many years, companies providing health insurance to their employees have been faced with quickly increasing medical and insurance costs. Employees have seen large increases to their portion of the premiums; fewer benefits; and higher deductibles, co-payments, and coinsurance percentages. Employers have looked for ways to reduce the increases in costs while still providing adequate health benefits to their employees so they can remain competitive with other employers.High-deductible health plans (HDHPs) are one option to traditional health plans which employers have considered to respond to the increased costs of health care. These plans supposedly encourage employees to be more careful in their health care consumption because they require a high deductible before the plan begins to pay benefits.Different health care plans have different tax implications to employees. Traditional plans are often accompanied by the option for a flexible spending account (FSA). High-deductible plans may qualify employers to offer their employees an option of a health savings account (HSA). So in choosing between a traditional plan and a high-deductible plan, an employee should not only consider the premiums and the medical benefits offered, but should also consider the tax implications of that choice.The next section gives some background on traditional and highdeductible health insurance plans. It also discusses an example of an employer which had been offering a traditional plan to its employees and then added another choice for a high-deductible plan. The following section will discuss tax laws relating to flexible spending accounts and health savings accounts which may be associated with traditional health insurance plans and high-deductible plans. Another section will discuss some other implications of the choice between plans. This section will be followed by the conclusion.HEALTH INSURANCE PLANSMany employees have been able to get health insurance plans through their employers over the last several decades. However, improvements in medical technology, increases in malpractice insurance costs, and increasing life spans with the attendant increase in health care needs, have all increased medical care and health insurance costs at a much higher rate than the general inflation rate. Employers desiring to maintain competitive compensation packages have struggled with the increasing costs of employee health care coverage.In most cases employers have continued to increase the amounts they are paying for employee health insurance. However, they have also increased the amounts (and perhaps percentages) of the premium portion covered by the employee. They have also had to strategically reduce benefits and increase the required dcducible amounts, the co-payment requirements, and the coinsurance percentages.Traditional health insurance plans may have an annual deductible, perhaps for each individual covered under the plan with a maximum deductible for the family under a family plan. Some services such as doctors' visits may require a co-payment for each visit with the remaining cost covered by the insurance. Other services may require a certain percentage of coinsurance paid by the insured, with the remaining amount covered by the insurance. These plans may also have a maximum coinsurance amount that must be paid by the insured or other maximums that limit the exposed risk to the insured. With the implementation of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) adjustments may need to be made to these plans to make them consistent with current requirements.Utah Valley University (UVU) has offered a fairly traditional health insurance plan for many years. Until recent years the premium was covered entirely by the university. However, a change in Utah State law a few years ago requires that employees pay at least 10 percent of the premium, so UVU has had to comply with that requirement. …
Publication Year: 2014
Publication Date: 2014-01-01
Language: en
Type: article
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