By Richard Argentieri, Senior Vice President, Chief Sales & Marketing Officer, Independent Health
If you are currently enrolled in a qualified high-deductible health plan (HDHP), you may be eligible for a Health Savings Account (HSA). An HSA helps individuals pay for qualified medical expenses, as well as save money for the future – all on a tax-free basis.
Although HSAs were first introduced in 2004, they have grown in popularity over the past few years. According to the 2020 Midyear Devenir HSA Research Report, approximately 29 million Americans have an HSA coupled with an HDHP, and balances of these accounts total more than $73.5 billion.
As a health savings accountholder since 2006, I’ve seen and experienced the unmatched value of having an HSA. Here are eight things I’ve found most valuable about having an HSA over the past 15 years:
- The money you put into your HSA is 100% tax deductible. The IRS establishes maximum contribution limits each year – for 2021, it’s $3,600 for single policyholders and $7,200 for family coverage. In addition, the rules allow people 55 and older to make additional “catch-up” contributions like a retirement plan. The catch-up contribution will continue to be $1,000 for 2021.
- It is your money. This includes any contributions your employer may make to your HSA. If you leave your job or change to a non-qualified HDHP in a future year, the money in the account stays with you. While you can’t make additional contributions until you enroll again in a qualified HDHP, you can still use the money in your HSA for out-of-pocket medical expenses.
- As long as you use your HSA money for qualified medical expenses, you never pay taxes on that money. If you’d like to know more about the broad scope of qualified expenses, check out IRS Publication 502. You’ll be surprised by what a qualified expense is beyond your typical deductible, copayments or coinsurance associated with your health insurance benefit plan.
- Unlike Flexible Spending Accounts (FSAs), there is no “use-it-or-lose it” stipulation or limits to how much you can roll-over from one year to the next. You can spend or save from year to year. Plus, there is no limit to how much you can accumulate in your HSA.
- You can reimburse yourself anytime for qualified expenses. For instance, let’s say you pay your qualified expenses with your favorite rewards credit card to earn miles or points or simply because you didn’t have enough money in your HSA at that time. When you are ready, you can reimburse yourself from your HSA account. There’s no rush, no deadline, and you can reimburse yourself the following year. Simply keep your receipts; since HSAs were established under the federal tax code as tax free, you’ll need the receipts for reference if the IRS were to audit your tax return, just like proof for a contribution to a charity on your taxes.
- You can use your HSA funds to pay for qualified expenses for dependents you claim on your tax return, even if the dependents are not on your health plan.
- Many HSAs offer the ability to invest like a 401(k). You might have to reach a certain balance depending on your HSA custodian’s rules before you can invest, but it’s another way to make your money work for you over time. You may even find the HSA becomes an important part of your retirement planning.
- As an added benefit in incorporating HSA funds into your retirement planning, you can use your HSA funds to pay for Medicare premiums for Part B and Part D, once you’ve turned the golden age of 65.
HSAs are not just a good idea for individuals. They can benefit employers as well.
We make managing HSAs easy
Independent Health is proud to partner with HealthEquity, the leading administrator of HSAs in the nation. Through this collaboration, Independent Health is the only health plan in Western New York that offers an HSA product with complete automated enrollment and claims payment solutions that makes it easier for employers and our members to manage, use and maximize an HSA.
While most HSA administrators are limited to only allowing claims to be paid that are incurred after an individual opens an account and deposits funds, HealthEquity – which is headquartered in Draper, Utah – is exempt from such limitations under the Utah Trust Law. As a result, our members have the unique ability to pay for HSA-eligible expenses anytime during their plan year, regardless of when they make their first contribution. Since many individuals do not contribute to their HSA when they first become eligible, this is just another level of protection Independent Health and HealthEquity can offer to our members during these challenging economic times.
Check with your employer to see if your plan includes an HSA option. You can also visit our website to learn more.