What is the difference between traditional benefits vs. health spending accounts?

If you own a business, employee benefits are a way of ensuring that you draw in talent and retain skilled workers. With different options available to you, it’s important to understand two common types of employee health benefits: traditional benefits plans and health spending accounts. This video walks you through the differences so that you can be better prepared to decide what works best for your business.

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Video transcript

As a business owner, you may be exploring group benefits for your employees. Offering group benefits can help attract and retain talent, boost productivity, and improve your employees’ overall health and well-being. 

Two common types of benefits are traditional benefits and health spending accounts.

Traditional Benefits 

Traditional benefits are a type of employee benefit plan that typically includes health insurance, dental insurance, life insurance, and other types of coverage. 

The employer selects the plans offered and pays a portion of the premiums, while employees typically pay the remainder through payroll deductions. There are usually set limits in each category, and employees may be responsible for deductibles and, or copayment 

Health Spending Account 

Health spending accounts are tax-advantaged accounts that employers can offer to their employees to help them pay for out-of-pocket medical expenses. Employees receive a set amount of money each year to use toward qualified medical expenses. This gives employees more control and flexibility over how the funds are spent. The key difference between them is that traditional benefits offer predetermined coverage, while health spending accounts offer employees flexibility and control over how they use their funds for medical expenses. 

As an employer, choosing what is right for your business and employees will depend on the specific needs of your employees and your company’s overall benefits strategy. 

Talking to your benefits advisor will help you determine which one works best for you.