Rapidly rising health care costs are a burden on U.S. businesses. As a result, some business owners, unable to afford additional health care expenses, are limiting the coverage provided to employees. As industry experts forecast that health care cost increases may exceed both employer budgets and employee wage growth, business owners need a cost-effective option for providing health care. A qualified high-deductible health plan (HDHP) combined with a Health Savings Account (HSA) offers a practical solution to manage health care costs.

A HSA provides traditional medical coverage and can be a tax-free way (if qualified medical expenses are paid) to help build savings for future medical expenses. Contributions to, and investments in, an employee's HSA plan can reduce taxable income. The HDHP/HSA also gives greater flexibility and discretion over how to use health care benefits.

In order to be eligible to establish a HSA, an individual must be covered by a HDHP, and the plan must have a minimum annual deductible of $1,050 for an individual or $2,100 for a family. A qualified HSA's annual out-of-pocket expenses cannot exceed $5,250 for an individual or $10,500 for a family. Eligibility is determined on a monthly basis, based on enrollment in a qualifying HDHP.

Depending on the HDHP chosen, there is a choice of using in-network and out-of-network health care providers. Using in-network providers will save money. With the exception of preventive care, the annual deductible must be met before the plan pays benefits. Preventive care services are generally paid as first dollar coverage or after a small deductible or co-payment. A maximum dollar amount (up to $300, for instance) may apply.

• With an HSA, there are no "use it or lose it rules" like those of Flexible Spending Accounts (FSAs).
• All amounts in the HSA are fully vested.
• Funds remain in the account year after year until used.
• Account holders are encouraged to spend their funds more wisely on medical care.

An HSA:

• Protects an account holder against high or unexpected medical bills.
• Lowers an account holder's health insurance premiums by switching to higher deductible health insurance coverage.
• Puts an account holder in control of making all HSA decisions.
• While there is compliance testing with an HSA, the type of testing is determined based on whether or not the benefit is offered under a cafeteria plan and if an employer contribution is involved. This applies to Key or Highly Compensated Employees. The plan provider can be consulted to learn more about testing specifics.

CPAs have a tremendous opportunity to play a consultative role with clients in advising them of all their health care options. Let them know about the HSA option, and partner with Paychex to implement the plan. The Paychex Health Savings Account is a valuable tax-savings tool for employers and employees. A HSA provides Paychex clients the ability to allow employees to reduce the cost of medical expenses by paying with pretax HSA funds. Meanwhile, Paychex takes care of the administrative details so clients can focus on more profitable activities to grow their business. Ensure your preparedness for imminent client questions — visit www.paychex.com today for more information.