By: Alex Tolbert, Founder of Bernard Health

Health care reform has fueled a movement toward consumer-driven health care, and as a result, companies are searching for ways to manage health care expenses while still giving employees ownership of their health care choices.

Finding an affordable option that lends value to every single employee coupled with the challenge of continually rising health insurance premiums makes selecting the right health plan extremely difficult for employers.

A recent study by the Society of Actuaries estimates that individual health premiums will increase by more than 30 percent and small businesses will see a 10 percent increase next year.
With so many confusing choices and changes in the months ahead, employers often ask the question: "What is the most affordable health insurance option for my business that still gives employees active control over their health care?"

The answer is simple: Health Savings Account (HSA)-based health plans.

The latest report from top health insurance industry association, America's Health Insurance Plans, shows that the number of people with HSA coverage rose to more than 13.5 million in January 2012, up more than 18 percent over the previous year. Even more encouraging is the fact that the majority of individuals with HSA coverage (59 percent) are enrolled through an employer.

HSA-based health plans are growing in popularity because they give employees flexibility, reward healthy behavior, and offer tax advantages. Not only do they cut premium costs, but they also provide a better benefit to employees.

Here are the top five things you should know about HSAs:

1. Premiums for HSA-based health plans are lower.
   Though rates vary, our advisors report that HSA-based plans typically cost 40 percent less than traditional co-pay based health plans, which means a portion of that savings can be contributed directly to a HSA.
2. Renewal increases are lower.
   On average, renewal rates for HSA-based plans are 33 to 50 percent lower than the annual renewal rates for traditional co-pay based health plans.
3. Employees can fund a HSA with their premium savings.
   Employees pay health insurance companies each month to protect them when they get sick. However, if they go six months without ever seeing a doctor, health insurance companies don't return their money. Instead of giving money away to a health insurance company, consumers can deposit the savings into their own bank account.
4. The money deposited into a HSA is triple tax advantaged.
   Currently, the annual HSA contribution limit is $3,250 for an individual and $6,450 for a family. HSA holders 55 and older can save an extra $1,000, which means $4,250 for an individual and $7,450 for a family. The money contributed is triple tax advantaged.
   Here's how:
   1) Any contributions made go into the HSA pre-tax.
   2) Money put into a HSA earns interest and grows tax-free. Employees can even invest the money in stocks or bonds if they prefer, and any growth in the account will be tax-free.
   3) Employees get a debit card tied to their HSA, and any money spent on qualified medical expenses is tax-free.
   There is a lot of money that can be saved each year through a HSA. HSA funds that are not used for health care grow tax-free, which motivates employees to protect their own health, leading to an overall healthier workplace.
5. A HSA is a great health AND retirement product.
   Money contributed to a HSA is similar to funds invested in an Individual Retirement Account (IRA). They both allow employees to take a tax deduction for contributions and roll over money year after year without restrictions.

The difference is that HSAs allow employees to save money on a pre-tax basis that can be used to pay for out-of-pocket medical expenses, such as deductibles and co-payments, either right away or down the road, even in retirement. As employees get older and face more health issues, drawing money tax free from a HSA can help cover the cost of health care, something that employees can't do through an IRA without getting slapped with a penalty.
After an employee turns 65, any money not spent on medical expenses can be withdrawn, as long as the employee pays an income tax at the time of the withdrawal.

A Smart Health Plan Strategy

HSA-based health insurance plans gives employees more power over their health care. Along with that power, they have more ability to plan for their future health and financial security.
Alex Tolbert is the founder of Bernard Health, a company that provides non-commissioned, expert advice on health, Medicare and COBRA insurance, and medical bill consulting. To learn more about Bernard Health, visit www.bernardhealth.com.