Insights

By Ruste Pontenberg 06/12/2019

Healthcare and insurance costs continue to rise and most believe this upward trend will continue. Cost increases affect individuals, employers and their employees. Some employers absorb these annual increases, but others are forced to pass the expense to their employees. 

As Americans look for ways to afford healthcare, many turn to a Health Savings Account (HSA) qualified High Deductible Health Plan (HDHP). Generally, these plans have lower premiums and lower out of pocket limits than traditional health insurance options. The HDHP can be a good choice, especially for those with minimal medical expenses or those with large annual medical expenses. The tradeoff of lower premiums may be offset by having to satisfy higher deductibles before the health plan begins paying. Always consult with your insurance agent or carrier to confirm your medical plan is HSA qualified. 

When covered by a qualified HDHP, the insured may be eligible to establish and contribute to an HSA. The HSA is a tax-qualified checking account which allows HDHP owners to set aside money, tax-free, for current and future medical expenses. This tax-advantaged account helps the average person save approximately 10-25% on health-related expenses in the following ways:

• Contributions are tax-free or tax deductible
• Interest and investment growth is tax-free
• When used for qualified medical expenses, withdrawals are not taxed. Qualified expenses include traditional medical, dental and vision expenses.

Although the IRS sets maximum annual contribution limits, there is no limit as to how large your HSA may grow. The 2020 annual contribution limits are $3,550 for individual plans and $7,100 for family plans. Unused HSA balances roll over each year and there is no time limit on using the funds once they are deposited. HSA owners may use their funds on themselves, their spouse and tax dependents. Contributions may be made by the employee and/or their employer. Employers may enjoy tax advantages when making contributions to their employees’ HSAs.

If you are looking for ways to lower medical expenses for yourself or your employees, consider an HDHP/HSA plan. More information regarding HSA eligibility, benefit and proper use may be found in IRS Publications 969 and 502.

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