Health Savings Accounts Under the Microscope

The current Republican proposals to replace and repeal the Affordable Care Act (ACA) places great emphasis on enhancing Health Savings Accounts (HSAs). Not everyone is covered under a High Deductible Health Plan (HDHP); however, given the current and future costs of healthcare, we anticipate more Americans will enroll in an HDHP by necessity. In order to have an HSA, one must first be covered under an HDHP with a deductible of at least $1,300 annually. There are many reasons to open a Health Savings Account and include the following: With life expectancies increasing- women will now live to age 81 on average, having money in an HSA to help pay for future health care expenses is paramount to proper estate planning. A couple retiring today will need around $260,000 assuming current life expectancies to cover their medical needs, and this doesn’t include Long-Term Care. Yikes! Having lots of money in a Health Savings Account is crucial to eliminating future risk.

HSA monies can be used for other things besides health insurance. The IRS has a long list but things such as chiropractic visits, prescription sunglasses, dental services, nerve pain therapy, acupuncture, are all on the list of covered expenses. HSAs are also protected by the continuous rollover of unused money provision. Yes, HSA money continues to roll over each year can be invested in Mutual funds, and account balances – if in good health – continue to grow. The “Use it or Lose it” provision of an FSA does not apply to a Health Savings Account.

Finally, one of the most important advantages of an HSA is the tax-favored treatment. HSAs are the only savings account void of three taxes. First, you can reduce your taxable income by having money taken from your paycheck pre-tax by reducing federal and state taxes. It is estimated you save 25-30% just on the pre-tax provisions. Second, monies grow tax-free as you can invest your money in investment vehicles similar to your 401(k) plan. Third, money used to pay for qualified health expenses are also void of any taxes. A trifecta of no taxation!

For more information regarding High Deductible Health Plans and HSAs, do not hesitate to give us a call. You’ll be happy you did.

Burman S. Clark

Burman S. Clark, RHU, CSA is the President of Muneris Benefits and a licensed insurance broker and consultant. His independent practice and focuses on employee benefits, individual life, disability, medical, and senior products. Burman has traveled extensively and provided guidance to large employer associations with regards to the Affordable Care Act.