Looking for ways to decrease your health care costs? A Health Savings Account (HSA) might be one way to accomplish this.
What is an HSA?
A health savings account can be funded with your tax-exempt dollars, by your employer, or both, to help pay for eligible medical expenses not covered by an insurance plan, including the deductible, coinsurance, and even in some cases, health insurance premiums.
Who is eligible for an HSA?
Anyone who is:
• Covered by a High Deductible Health Plan (HDHP);
• Not covered under another medical plan that is not an HDHP;
• Not entitled to Medicare benefits; or
• Not eligible to be claimed on another person’s tax return.
What is a High Deductible Health Plan (HDHP)?
A High Deductible Health Plan is a plan with a minimum annual deductible and a maximum out-of-pocket limit as listed below. These minimums and maximums are determined annually by the Internal Revenue Service (IRS) and are subject to change.
What are the pros and cons to establishing a HSA?
Pros:
• Greater individual control over health care dollars
• Increased consumer decision-making, potentially leading to healthier lifestyle
• Incentives for individuals to save for health care expenses they will encounter in retirement
• Better tools for making more informed health care choices
• Debit cards and checking accounts to speed reimbursement for employees, save paperwork for employers
• Savings for employer on HDHP premiums. Companies often save enough through the higher deductible that they are able to contribute to the savings accounts.
• For employers, HDHP design preserves distance from first-dollar coverage.
Cons:
• Tremendous communication challenges in shifting costs, risks and responsibilities to employees
• Time-consuming effort for a company to implement
• Continuing administrative hassles and some state laws to be addressed