If your insurance deductible is keeping you up at night, you might want to consider choosing an HSA account. An HSA (Health Savings Account) is like a personal savings account. It is designated for use on healthcare expenses.
For most Americans, a Health Savings Account is a companion to a high deductible medical plan. The long-term purpose of the HSA is to help you save now for future medical expenses later. The idea is that if something catastrophic happens to your family, your high deductible doesn’t bury your finances. However, there are several benefits of an HSA account that are less obvious.
Reduces your taxable income
Every month, you can deposit a designated dollar amount or a percentage from your paycheck. This money is contributed pre-tax, which means it reduces your overall taxable income. This lowers the overall amount you owe taxes on. In addition, it’s tax-free money earning tax-free interest. And no, it’s not taxed when you withdraw either. It’s basically the crown jewel of tax-deferred accounts.
It’s your money
Your money is yours. You can take it with you if you leave the company, retire, switch insurance companies, you keep your Health Savings Account funds to use it as you wish. Most HSA providers simply send you a debit card and it’s up to you to manage where and how you spend your HSA. If you want to spend it at Walgreens getting cold medicine, go for it. If you want to save it for your upcoming LASIK surgery, go for it. Emergency room co-pay? No problem. If you’d like to tuck it away just in case you have a catastrophic illness or accident, that’s OK too. It’s yours and you can use it as you will.
Your balance rolls over from year to year
If you’re lucky enough to have a healthy year and you didn’t have any good reason to whip out your Health Savings Account debit card, you can rest easy. Your balance and everything contributed from year to year rolls over. If you don’t use it, you don’t lose it. There’s no rush to get the braces put on or stock up on medical supplies in December just to try and use the last bit of your savings. You can save it up from year after year.
Lower monthly premiums
If you are enrolled in a high deductible health insurance plan, you are eligible to enroll on an HSA. These plans have a lower monthly premium than traditional insurance coverage. This lower deductible allows you the freedom to contribute to your HSA and often still have lower monthly insurance costs than other plans.
Others can contribute
If you have a sudden increase in medical expenses due to accident, injury, or illness, the HSA makes it easy for other to contribute to your medical expenses. Anyone can add to your HSA through a simple electronic transfer.
Anywhere that taxes a debit card payment can charge your HSA. This makes it easy to cover your expenses if you get hurt while on vacation or if you need to pick up a prescription while you’re out of town.
You can invest it
Your HSA funds can be invested in mutual funds based on the HSA administrator. These are typically low cost index funds that provide an additional option to grow your money.
Medicare and retirement benefits
If you have contributed to a Health Savings Account for years but haven’t used your balance, you can take a distribution from your account upon retirement. This works similarly to a traditional IRA, but without the 20% penalty. However, you do need to be 65, not 59 1/2 which applies to IRA and 401K accounts. You can also leave the accumulated HSA balance in the account and use it for Medicare Part B, Part D and Medicare Advantage premiums, so long as you are 65 or older.
There are seemingly endless benefits to contributing to a Health Savings Account. The trick is to start it early, so it has time to accumulate and become useful. If you are a relatively healthy individual who doesn’t have significant health expenses on a monthly basis, a high-deductible insurance plan with a Health Savings Account might be the best option.
Magellan HCM is an all-in-one source to manage your group insurance needs including HSA options. Give us a call today to get the insurance partner you need and the benefits you’ve been searching for.