Healthcare plans are following the pattern of retirement plans with more companies pushing the costs to employees using high deductible healthcare plans (HDHC) just as employers moved from defined benefit (DB) pension plans to defined contribution (DC) plans like 401ks. But an important component of HDHC is also providing an HSA (health savings accounts) with some employers, like the one attending a TPSU program at Vanderbilt University, contributing to their employees’ HSA to pay the healthcare premiums.
HSAs are considered by many industry experts to be a better investment than 401k plans for participants because they enjoy triple tax savings – tax free going in, tax free while they grow and tax free when the investments are dispersed. Perhaps as a hangover from old cafeteria plans where you “use it or lose it”, HSAs carry over and can be used for future medical benefits. And as TPSU Adjunct Lecturer Daniel Bryant explains, people need to change their vision about retirement – before the beach house, they need to figure out how to cover medical expenses which starts at $250,000 in retirement per healthy person.
The plan sponsor at the Vanderbilt TPSU program went to a HDHC plan five years ago and included an HSA to which they contributed to help employees pay the premium. So why not offer a more generous healthcare plan? Because the HSA provides employees with more flexibility to spend their money as appropriate for them – maybe they are a veteran or their spouse has a generous healthcare plan, for example.
The response to the HDHC and HSA has been very positive by the Nashville based healthcare company who is considering offering similar types of investments as offered in their 401k. Most companies offer limited investments, sometime money markets funds, in their HSA which sends the old message that these accounts are like checking accounts, not for long-term savings. Treating HSA investments like a 401k only makes sense with more options available and monitoring those investments in both plans is simpler.
