What is an HSA?
It’s no secret that with health insurance premiums and costs on the rise, lots of people are looking for small ways to save. We recently wrote a post about the important differences between an FSA and an HSA — but for those who are brand new to the world of benefits, we wanted to break it down a little further.
What does HSA stand for? How can an HSA help me save on health-related costs? Here’s what we think you need to know:
What is an HSA?
An HSA — or health savings account — is a tax-advantaged benefits account that works kind of like a personal savings account, if your savings account had restrictions for eligible purchases. Money from your HSA can be spent on a wide range of eligible costs, from doctor’s visits to new glasses to flu shots. Unlike FSAs (flexible spending accounts) you don’t get an HSA through your employer. Instead, you own and control the money in your account, although some employers will still contribute to the account on your behalf.
In order to be eligible for an HSA, you need to be two things:
1) Under the age of 65
2) Enrolled in a high-deductible health insurance plan
It’s important to note that additional specialized insurance plans (like dental or vision) won’t get in the way of you obtaining an HSA, so long as your general health insurance has a high deductible. The downside of having a high deductible plan is of course that you’re paying more out of pocket, but the upside is that monthly premiums are generally lower, and the ability to enroll in an HSA certainly has its advantages.
For 2020, the coverage limit for an individual is $3,550, and $7,100 for family coverage. This includes any money your employer contributes, so be sure to budget wisely when you’re considering your healthcare expenses for the year to come.
How can an HSA help me?
One of the great things about HSAs is that like FSAs, they’re tax-advantaged. In other words, the money that you deposit into the account is not taxed, either on its way into the account or on the interest that the account accrues. That means if you budget right, you could be looking at some serious savings over time.
Another great thing about an HSA is that it’s completely yours, and not tied to your employment status. So if you are planning on switching jobs, or even just health plans, that’s totally fine — your HSA will come right along with you. Any money that is unused at the end of the year will roll over into the next, meaning that any money you put in is yours to keep, even if you way overestimate your budget.
That being said, an HSA isn’t the best choice for everyone. Since having a high-deductible health plan is a requirement, it’s first essential to calculate whether having a high deductible plan is the best situation for you.
For instance, let’s say you save a whopping $250 a month on a high-deductible plan compared to your current plan — that’s great! That means you’d be saving $3000.00 a year on insurance cost. But while your monthly payments might go down, your deductible will go up. That’s fine during a period where you’re confident that you’ll have fixed expenses, but during a period where you might have a medical emergency—you know, like during a global pandemic—it’s worth crunching the numbers to determine whether the lower monthly cost balances out the risk.
If you have any questions about what kinds of benefits you should be offering your employees, or how you can help them take advantage of the benefits they have, feel free to reach out at email@example.com.