Health insurance plans with versatile, tax-advantaged savings accounts are an option in many workplaces.
A Quick Overview
More than 20 million Americans managed their health costs under high-deductible health plans (HDHP) with health savings accounts (HSA) in 2018, according to a survey by the Henry J. Kaiser Family Foundation. These plans feature lower monthly costs (referred to as premiums) than traditional health insurance plans, but higher deductibles, which is the amount employees pay for covered health care services before their insurance starts to pay.
To help employees pay deductibles and other out-of-pocket costs, HDHPs are often paired with HSAs. Employees and, in many cases their employers, make pre-tax contributions to the HSAs, and employees use a debit card linked to the account to pay for health-related expenses. Employees can keep the accounts and the money in them, even as they change jobs or move into retirement.
High-deductible health plans with health savings accounts are a steadily growing line of business at Medical Mutual, one of Ohio’s largest health insurers, says Josh Schneider, director of product management at Medical Mutual.
“If you have the opportunity, you should be taking advantage of HSAs,” Schneider says. “We’re always looking for ways to help our members and groups manage expenses, and HSAs are a great tool for doing that.”
What’s in It for You
HSA advocates often refer to the triple tax advantage these accounts offer.
• On a tax-free basis, individuals can contribute up to $3,500 to HSAs and families up to $7,000, under 2019 guidelines. Those 55 and older can make catch-up contributions up to $1,000 over those limits.
• Withdrawals to cover qualified medical expenses are tax-free. Qualified medical expenses generally include doctor visits, medications and medical equipment — including crutches, hearing aids and wheelchairs — and dental and vision care. Once someone turns 65 and enrolls in Medicare, money from HSAs can be used to pay for Medicare premiums.
• Account balances roll over each year and can be invested. The earnings on those investments are not taxed.
The tax advantages are among the reasons combined contributions from employers and employees to HSAs are on the rise, from $3.2 billion in 2007 to $43.5 billion in 2018, Devenir Research reports.
“The longer you have it, the more you appreciate it,” says Marianne Nicoletti, senior client manager in group benefits for Oswald Cos. in Cleveland. “Employees come to see these accounts as money in their pockets.’’
Insurers typically partner with financial institutions to offer HSAs. Nicoletti says she likes the way Medical Mutual integrates insurance plans and HSAs from a single online platform, from which users can check on medical claims, deductibles, debit card payments and account balances.
Medical Mutual also has a mobile app for managing HSAs, Schneider says. Users can view their account details and transactions, submit expenses for reimbursement and pay bills all from their mobile devices. The app even has a bar code reader that helps users determine if a health care product or service can be paid for as a qualified medical expense.
“HSAs are a great way to save for current and future medical expenses,’’ Schneider says. “Add in the convenience of online tools to manage these accounts, and you can see why high-deductible health plans with health savings accounts are a popular option.”