If you have staff with health savings accounts, they still have until April 15 to make additional contributions to their accounts if they want to reduce their tax bills for last year.
HSAs allow your employees to put away funds to pay for future medical expenses. Usually, these accounts are funded with pre-tax deductions from your employees’ paychecks, but if they didn’t max out their contributions last year, they still can do so up until the tax-filing deadline.
Under IRS rules, for 2023 employers and employees can contribute a combined $3,850 for single employees and $7,750 for families. (For 2024, the limits are $4,150 for single coverage and $8,300 for family coverage.) Since funds workers contribute to their HSA are made before their salaries are taxed, they reduce their overall taxable income.
Employees 55 and older can contribute an additional $1,000 every year as a catch-up contribution on both single and family plans.
One of the key features of these plans is that the funds in them can be carried over from year to year and can be invested like a 401(k) plan. Funds in HSAs can be used to pay for a myriad of out-of-pocket medical-related expenses, pharmaceuticals and medical devices. Withdrawals to reimburse for these expenses are also not taxed.
Not everyone is eligible to participate in an HSA. They are only available to employees enrolled in a high-deductible health plan. HDHPs feature lower premiums in exchange for a higher deductible, meaning the employees have to pay more out of pocket before coverage kicks in.
Spread the word
Consider sending out a memo to your staff reminding them that if they didn’t max out their HSA contributions last year, they can still do so until April 15.
Under IRS rules, even staff who didn’t have an HSA last year are eligible to open one for 2023 and contribute funds to the account up until April 15. The only catch is that any funds they contribute can only be used for future medical bills after the account is set up.
The HSA administrator will generate the required tax forms that your employees will need to include when filing their taxes. There are two forms:
IRS Form 5498-SA, which reports contributions, and
IRS Form 1099-SA, which reports distributions taken out of the HSA.
Individual filers must also report the figures on those two forms on IRS Form 8889.
As health insurance and health care costs continue climbing, some employers are taking new and innovative steps to tamp down costs for themselves and their covered employees while not sacrificing the quality of care they receive.
Some of the strategies require a proactive approach by engaging with their broker and insurer, and even local health care providers, efforts that may be hampered by location and how flexible insurers may be. The goal for these employers is to reduce their and their employees’ costs and improve health outcomes.
The following are some strategies that employers are pursuing.
Steering workers to certain providers
One way to reduce spending is to contract with insurers that guide patients to facilities and providers that are more affordable and who have good patient outcomes. This process, called steerage, if executed correctly can save the employee money on their deductibles, copays and coinsurance and help them get better overall care.
For standard services, this steerage can help your employees see immediate savings on small payments. But for services that require pre-authorization, such as an MRI or X-ray, the insurer can help steer them to the least expensive provider. The differences in cost for these pre-planned services can often be hundreds of dollars, if not more.
Even guiding workers to outpatient facilities over inpatient facilities for these services can yield even greater savings and a better patient experience.
To get the most benefit out of steerage some employers have been switching from traditional group health insurance to self-insured direct-to-employer health plans. These plans will centralize employees’ health care with an integrated provider network or hospital group that focuses on coordinated care, which can reduce overall costs and improve the quality of care.
Since the employer is self-insured, they can work with a health system to establish an integrated care strategy that puts a premium on steerage.
Getting a handle on drug spending
Pharmacy benefit costs are the fastest-growing part of health care costs, up an estimated 8.4% in 2023, according to the Mercer “National Survey of Employer-Sponsored Health Plans.” And as new and more expensive pharmaceuticals hit the market, the portion of overall health care costs that goes towards medications will continue to rise.
One contributor to the increasing prices that your staff pay for their medication may be the pharmacy benefit manager that your insurer uses. Many PBMs earn commissions on drugs dispensed to patients and they benefit from steering them to higher-cost drugs. As well, many PBMs steer patients to pharmacies that they own, further muddying the waters.
There is a way to cut through this mess, but it requires asking tough questions of your insurer and/or the PBM. Ask them how they earn their money, and what kind of commissions and margins they are earning on drugs dispensed to your employees. It’s best to take this approach with the assistance of us, your broker.
Having an honest discussion with your insurer and PBM can open opportunities to save on pharmaceutical outlays through various strategies, like using generic drugs instead of brand-name ones and ensuring that your workers get the full manufacturer rebates — and that they are not kept by the PBM.
Depending on the PBM, this may or may not work.
Helping your employees get healthier
The healthier your workers are the less they will need to access health care, meaning they will spend less for medical services.
Employers can help their employees by weaving in health and wellness education in their staff communications. As well, many wellness programs focus on improving health, including smoking cessation programs, weight loss programs and free or subsidized gym memberships.
Also, many Americans are not keeping up on preventive care visits, many of which are free under the Affordable Care Act. Keeping up on these visits can help stave off larger health problems in the future.
Sometimes what’s needed for your employees to take preventive care seriously is education. You can work with us to come up with communications strategies aimed at trumpeting the importance of these visits by focusing on improving overall health and cost savings in the long run.
The takeaway
The above strategies follow a trend in health care focusing on improved health outcomes for patients by better coordinating care, particularly for those with chronic conditions. For employers, the name of the game is keeping costs down for themselves and their staff while not sacrificing quality of care and while improving their workers’ health.
The Equal Employment Opportunity Commission continues seeing a steady flow of complaints for one of the more common forms of workplace bias — age discrimination.
The number of court filings the EEOC made under the Age Discrimination in Employment Act (ADEA) in fiscal year 2023 was more than double that of fiscal year 2022. As the EEOC steps up its efforts under the Biden administration, it’s crucial that employers have in place policies and employment standards to avoid any appearances of discrimination against workers based on age.
The ADEA prohibits harassment and discrimination on the basis of a worker’s age for individuals over 40. This extends to any aspect of employment, including hiring, job assignments, promotions, training and benefits.
The law even applies to employers that use third party recruiters to screen job applicants, according to EEOC guidance.
For an idea of how costly an age discrimination lawsuit can be, consider the following recent actions (keep in mind that these numbers don’t include attorneys’ fees):
In March 2023, Fischer Connectors settled with the EEOC for $460,000 over accusations that the manufacturer fired a human resources director and replaced her with two younger workers after she had spoken up about company plans to replace other older workers.
In September 2023, two former IBM human resources employees — both over 60 — sued IBM after they were terminated, alleging age discrimination.
Wisconsin-based Exact Sciences agreed to pay $90,000 to settle a lawsuit alleging that it had discriminated against a 49-year-old job applicant based on his age after it turned him down for a medical sales rep position in favor of a 41-year-old.
A 52-year-old woman sued a Palm Beach restaurant, alleging violations of the ADEA and the Florida Civil Rights Act of 1992. She claims that after working for 10 years as a seasonal server, she was terminated on the grounds that the restaurant was moving to year-round employment, yet continued to hire young seasonal workers.
What you can do
Ageism in the workplace doesn’t just negatively affect employees. It also affects your company. Over the past 15 years, age discrimination cases have accounted for 20-25% of all EEOC cases — and they typically receive the highest payouts.
Ageism is bad for business in a number of ways. Not only do you risk a large settlement, but you also miss out on a large talent pool of older workers in your hiring practices. You also miss out on the major contributions that older workers can make to your organization.
To prevent age discrimination at your firm:
Train your managers and supervisors on age discrimination and that it won’t be tolerated. Have in place consequences (and follow through on them) for managers that discriminate against an employee due to any protected status, including age.
Consider taking out any sections of your application form that disclose information about an applicant’s age. Removing the date that an applicant graduated or completed their degree is helpful. This can allow hiring managers to focus on the skills and experience an applicant brings to the table rather than their age.
If you have to go through a layoff, ensure you don’t make any decisions based on age. You should focus only on two things during this process: making choices solely based on performance and the necessity of the position they hold. Even a seniority-based system is acceptable.
The takeaway and insurance
Often when the EEOC settles these cases, they will require the employer to sign a consent decree requiring them to implement age-discrimination training for hiring managers. You shouldn’t wait for an order by the agency to do the same.
Finally: In the event you are sued for age discrimination, if you have in a place an employment practices liability policy, it may cover your legal costs and any potential settlements or verdicts.
Besides age discrimination, these policies will cover a host of other lawsuits by employees.
With more than half of all private sector employees enrolled in high-deductible health plans, it’s important that employers have in place certain protocols to ensure that they are a success.
As health insurance costs have risen, more employers have started offering their employees this option as the upfront premiums are often lower than with other plans. The trade-off, however, is that workers have a higher deductible — meaning they have to pay for a set amount of medical care and prescription drugs before the plan’s benefits truly kick in.
The average HDHP deductible for self-only coverage was $2,000 in 2023, while the minimum deductible that a plan must have to qualify as an HDHP is $1,600 ($3,200 for family coverage).
The key to ensuring that the HDHP is a success in part comes down to avoiding four common mistakes.
1. Failing to offer a health savings account
The idea behind HDHPs is that the money employees save on premium can be funneled into an attached HSA, which can be used to reimburse out-of-pocket medical expenses.
HSAs are tax-advantaged accounts that allow enrollees to save up to pay qualified medical expenses. They decide how much money they want to transfer to their HSA each pay period — funds that are not subject to taxes. The employer can also contribute to its employees’ HSAs to encourage participation.
2. Failing to gauge the employee population
HDHPs are not a good fit for everyone. While they are for those who do not use a great deal of health care services, they can be burdensome to people who use medical services often, have chronic conditions or are middle-aged and older.
With that in mind, before offering an HDHP you need to know it is right for your organization. To do this, you can focus on a number of factors like the average age of your workers, their general health status and understanding of health care and their insurance. Some of this information can be gathered by doing an anonymous survey of your staff.
Knowing this information is crucial to understanding whether an HDHP is the right fit for your crew. For example, if a majority of the employees are older and/or have certain health conditions, pushing an HDHP on them may not be a good move as their out-of-pocket costs may rise significantly and outweigh any savings from lower premiums.
3. Failing to educate your staff
Workers may be hesitant to enroll in an HDHP if they don’t understand it, and particularly when they see how high the deductible is.
That’s why training is essential to ensure that your employees understand how these plans work and how to get the most out of them.
One of the focuses should be on how employees can take control of their health expenditures and shop around for certain medical procedures that a doctor may order. Providers in an insurer’s network may charge vastly different rates for the same procedure.
You can also explain that those who rarely use their health insurance can save a bundle on their premiums and use those savings to bolster their HSA.
4. Not offering supplementary benefits
Employee behavior and lifestyle are significant factors in health status and can have a huge impact on the cost of health care.
Offering wellness programs can boost employees’ overall health, help them lose weight or quit smoking. Other voluntary benefits like critical illness insurance can fill in the gaps when employees have a high deductible.
For example, if someone with critical illness insurance had a heart attack, the policy would pay for medical expenses and possibly missed time from work. If the employee’s deductible is $5,000 and the heart attack payout from the critical illness policy is $5,000, the enrollee wouldn’t really have to pay anything toward their deductible.
After that, their HDHP would start picking up the tab through coinsurance, until the out-of-pocket maximum was reached. Then their insurance would cover everything at 100%. Other voluntary benefits employers often offer staff in HDHPs include:
Accident insurance,
Cancer insurance, and
Life insurance.
The takeaway
Introducing an HDHP to your employees can be a fraught exercise as they learn that they’ll face higher out-of-pocket costs for medical services. But these plans can be beneficial to many people, and those who understand how they work and how they may benefit from their plan will be more satisfied with their coverage.
With multiple generations working side-by-side in this economy, the needs of your staff in terms of employee benefits will vary greatly depending on their age.
You may have baby boomers who are nearing retirement and have health issues, working with staff in their 30s who are newly married and have had their first kids. And those who are just entering the workforce have a different mindset about work and life than the generations before them.
Because of this, employers have to be crafty in how they set up their benefits packages so that they address these various needs.
But don’t fret, getting something that everyone likes into your package is not too expensive, particularly if you are offering voluntary benefits to which you may or may not contribute as an employer.
Think about the multi-generational workforce:
Baby boomers – These oldest workers are preparing to retire and they likely have long-standing relationships with their doctors.
Generation X – These workers, who are trailing the baby boomers into retirement, are often either raising families or on the verge of becoming empty-nesters. They may have more health care needs and different financial priorities than their older colleagues.
Millennials and Generation Z – These workers may not be so concerned about the strength of their health plans and may have other priorities, like paying off student loans and starting to make plans for retirement savings.
Working out a benefits strategy
If you have a multi-generational workforce, you may want to consider sitting down and talking to us about a benefits strategy that keeps costs as low as possible while being useful to employees. This is crucial for any company that is competing for talent with other employers in a tight job market.
While we will assume that you are already providing your workers with the main employee benefit – health insurance – we will look at some voluntary benefits that you should consider for your staff:
Baby boomers — Baby boomers look heavily to retirement savings plans and incentives, health savings plans, and voluntary insurance (like long-term care and critical illness coverage) to protect them in the event of a serious illness or accident.
You may also want to consider additional paid time off for doctor’s appointments, as many of these workers may have regular checkups for medical conditions they have (64% of baby boomers have at least one chronic condition, like heart disease or diabetes).
Generation X — This is the time of life when people often get divorced and their kids start going to college. Additionally, this generation arguably suffered more than any other during the financial crisis that hit in 2008. You can offer voluntary benefits such as legal and financial planning services to help these workers.
Millennials and Generation Z — Some employee benefits specialists suggest offering these youngest workers programs to help them save for their first home or additional time off to bond with their child after birth.
Also, financially friendly benefits options, such as voluntary insurance and wellness initiatives, are two to think about including in an overall benefits package.
Voluntary insurance, which helps cover the costs that major medical policies were never intended to cover, and wellness benefits, including company-sponsored sports teams or gym membership reimbursements, are both appealing to millennials and can often be implemented with little to no cost to you.
As the economy continues roaring, the market for top talent stays exceedingly competitive. Multiple studies have consistently shown that a robust set of employee benefits is a vital component of an overall compensation package.
But it’s tough for smaller companies to compete with their large counterparts, who have the advantage of economies of scale. As a result, many employers are increasingly turning to voluntary employee benefits, which allow them to provide valued, high-demand benefits to employees at little or no cost to the company.
How voluntary benefits work
Voluntary benefits are arranged by employers but either paid for by staff via payroll deduction or by the employers themselves. Businesses generally set up a menu of options that their workers can select from for themselves, based on their own needs.
The employer deducts any fees or premiums for these benefits from employee paychecks and forwards them in a single batch to the benefit vendors.
Once the employee enrolls in a voluntary benefit plan, payroll services companies routinely automate this process for employers, making ongoing benefits administration hassle-free for small businesses.
And best of all, because premiums and fees are often paid by the employees, even small companies can provide popular and highly valued benefits for little or no cost.
Popular voluntary benefits
There are several types of voluntary employee benefits on the market today, with more innovative new benefits and perks rolling out every year. However, the following are among the most in-demand by employees and commonly offered by their employers:
Dental and vision insurance coverage
Disability insurance coverage
Life insurance — can be term or cash value
Legal assistance/prepaid legal services
Identity theft insurance
Fitness/health club memberships
Long-term care insurance
Financial planning/counseling services
Accident insurance
Hospital indemnity plans
Pharmacy discount plans
Critical illness insurance (e.g., cancer insurance)
Pet insurance.
Employees can often buy these benefits and services via their employer’s group voluntary benefits plan much more cheaply than they could buy them on their own.
Voluntary benefits have been becoming more popular among employers in recent years as unemployment falls. One reason: More employers are offering high-deductible plans as health insurance costs continue to increase.
Critical illness and hospital indemnity policies have seen big gains in enrollment as workers turn to them to help cover those deductibles and copays if they have a costly health event like cancer or another critical illness diagnosis.
According to a recent LIMRA study, seven out of 10 employers surveyed reported that they believe offering voluntary benefits improves employee morale and satisfaction.
A 2023 Harris Interactive poll found that when employers offer voluntary benefits, 55% of workers, on average, report that they are satisfied with their employer’s overall benefit mix. Where the employer did not offer voluntary benefits, the satisfaction rating fell to 32%.
Best practices
Don’t overwhelm employees with too many benefit choices at the same time. Roll them out a few at a time, starting with life insurance, dental/vision and/or disability insurance. These are proven high-participation programs.
Match benefits to your employees’ life stages. Millennials have different needs and interests than baby boomers.
Put effort into your benefits education and communication plan.
Use a variety of different communication tools. Embrace digital and in-person communication, in addition to printed brochures — especially for millennials.
