Health Savings Accounts - A good fit for you or not? ...

(For employees and business owners under age 65)

The lowest priced health plan may not always be the best fit for you.

Employees who are enrolling in a company plan often choose an hsa because it is the lowest priced option. It is so important though to understand how hsa's work before you enroll in one. Not understanding how the plans work will lead to unexpected costs when you seek care.

Tax Savings

HSA's are tax advantaged which make them attractive to business owners. Higher income earners also tend to enroll in hsa plans for the tax savings.

HSA's are often referred to as medical IRA's as the same rules apply to them as they do to IRA's. HSA's grow tax deferred and roll over every year. They are not like FSA's in which your funds do not roll over.

How to enroll and use one: 

·       Enroll in an HSA compatible health plan.

·       Open the health savings account.

·       Fund the savings account monthly, quarterly, or yearly.

·       Pay all your qualified medical and dental expenses from the savings account.

·       Write off what you put in to the savings account off your taxes. 

Contribution limits

There are some limits to contributions. For 2017 the individual contribution is $3400 and $6750 for families. For those aged 55 or better you can fund it up to $1000 extra per year.

Who is not a good fit

Employees with families who earn less than $60,000 per year generally are not a good fit for hsa's for a few reasons:

#1. It is difficult to put money away in to the savings account due to a lower income.

#2 It is difficult to pay for medical expenses out of the savings account because of #1.

#3 Families with several children who go to the doctor often.

#4 Those who do not need extra tax write offs.

One of the most important things to understand about hsa's is how it works when you see doctors.

If you enroll in one you will be paying 100% of the cost of the service until you meet the calendar year deductible. The deductible is often high like $4500-$6000 per year.

For Example:

As an example if Joe has an hsa when he sees the doctor he pays the full cost of the office visit from his savings account. (Except for Preventative checkups). If he needs a lab or prescription the same rule applies as for all covered services.

If you are accustomed to a plan with lower copays, an hsa can be a shock and very unpleasant. If the issue of cost affects a person's access to care then an hsa is not a good fit for the person.

Good plans or bad plans?

It is not so much of a question if an hsa is a good or bad plan. The important consideration is if it is the right fit for the individual person.

As long as you understand the way it works it is easy to know if one is right for you or not.

If in doubt....

Talk to a licensed health insurance agent who can ask you some questions to determine if it is the right fit for you. 

Are you turning 65 this year?

Have Medicare questions? 

Talk to a licensed agent

to learn what your options are.

530-306-7598