It’s that time of year again at my hospital where all the nurses are looking at benefits and figuring out what medical plan is best for them. I’ve been getting a ton of text messages and questions at work on what is a Health Savings Account (HSA) and what medical plan is best for them. Every medical plan will be unique to everyone’s health situation, so please read the comparisons charts offered at your company to figure out what is best for you and your family. This article will only give an overview of what is an HSA and hopefully help you evaluate if this type of plan is best suited for your own personal health care needs.
When I first started working in the States, I didn’t understand much about how health insurance worked. I came from Canada (yes I’m Canasian) and the fear of dealing with large health insurance bills scared me. Hence I went ahead and did my research to figure out what is the best health care plan for me. I opted for a High Deductible Health Plan (HDHP) which gave me the option of opening an HSA account. So what is a Health Savings Account? An HSA allows you to save pre-tax money into a savings account. It is similar to your 401k, but it is different because it is ONLY intended to pay for health care expenses today or in the future. What I personally love about the Health Savings Accounts is the opportunity to save money for future health care dollars.
Make note that in order to be eligible for an HSA, you need to be enrolled in a HDHP (High Deductible Health Plan) or CDHP (Consumer Directed Health Plan). Say What?! – These plans offer significantly lower premiums – meaning you pay less per paycheck, but when you need to go see your primary care physician or get a prescription filled, you will need to fulfill a higher deductible before your insurance begins to pay. That is the trade off, you pay lower in premiums, but you need to pay for your own health care until your deductible is met. The deductible for an individual has to be at least $1300 and for a family it has to be at least $2600. Now you are asking me, “Why the heck would I want to pay that high of a deductible?” I will list out 7 important points about the HSA to help you determine if enrolling in a HDHP or CDHP may be the best option for yourself and your family.
- It pays for you and your dependent’s eligible healthcare expense – including eligible dental, vision charges, and health care supplies, – eligible expenses is included towards your deductible (what you pay before the insurance plan pays benefits)
- Eligible Expenses: Dental, vision, health care supplies, copays, coinsurance, office visits, prescription drugs, dental x-rays, fillings, crowns, eyeglasses (you can use your HSA to pay for these eligible healthcare expenses that will be included in your deductible)
- Expenses not eligible – premiums, over the counter medications without a prescription, cosmetic medical procedures not medically necessary
- Using an HSA is easy – it works like a normal debit card, you can only use funds if they are in your account – just remember to keep your receipts for your tax records – there is no need to send them in to get reimbursement.
- You can contribute to the annual IRS contribution limits – Individual is $3,350 and Family is $6,750. – If you contribute the maximum annual, every year, that helps covers your deductible and your out of pocket maximum per year if you need to use it for health care expenses.
- Any unused HSA funds roll over year after year. For example, if you contribute $3000 per year and for the past 5 years did not need to use any of your HSA funds for health care expenses, that means you would have $15,000 dollars that you could use towards your heath care in the future.
- HSA offers a TRIPLE tax advantage – contributions made to your HSA are tax deductible (lowers your taxable income – meaning more money in your pocket), grows tax free, and withdrawals are tax free for all qualified medical expenses. This means you don’t have to pay the government any taxes if you use your funds for any medical expense.
- The money in your HSA is yours, every dollar, dime and penny is yours even when you leave the company or retire, its all yours to use for future health care.
- Tax advantage way to save for medical care expenses in retirement. You can use it to pay for medicare parts A, B, and D and medicare HMO premiums. It’s tax free and penalty free. Thus meaning saving today will help you pay for your health expenditures during retirement.
Remember every company offers different health care plans with their HSA. I advise you to read your company’s information carefully or consult your health care insurance carrier for more information. Need more information about what is an HSA account? Please refer to http://www.hsacenter.com or if you have any questions please email me at firstname.lastname@example.org and I would love to help you out with any questions to the best of my ability.
*The information provided on this blog is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Please contact your financial advisor or your company’s benefits for specific rules.