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Health Savings Accounts 101


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Think of a Health Savings Account (HSA) like having a health 401(k) you can dip into now—or, let it build to pay for qualified medical expenses after you retire. This simple tutorial is designed to help you decide whether a Health Savings Account might be a good fit for you (and your family).

Published in: Healthcare
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Health Savings Accounts 101

  1. 1. An Introduction to Health Savings Accounts A SLIDESHOW
  2. 2. If you’re considering a Health Savings Account (HSA)…
  3. 3. there can be SO many advantages. An HSA is a personal savings account.
  4. 4. You own it, you keep it, & you could benefit. not your employer if, say, you switch jobs If you’re eligible
  5. 5. HSA funds rollover year-after-year. Some employers even contribute into your HSA. (Free money, yay!)
  6. 6. Think of an HSA like a “health 401(k)”. Dip into it now to pay for your qualified health expenses. Or, let it build to pay for qualified health expenses after you retire.
  7. 7. A Health Savings Account is triple tax advantaged. 1.Contributions are not taxed; 2.Funds in an HSA grow tax-free; and 3.Funds used to pay for qualified health expenses are never federally taxed!
  8. 8. And, ask your HSA vendor about investment options. Some HSA administrators allow you to invest HSA dollars into mutual funds similar to a 401(k) or IRA once your account reaches a certain balance.
  9. 9. The list of “qualified medical expenses” is surprisingly broad. (Defined by the IRS in Publication 502)
  11. 11. HSA funds can be used on you, your spouse, and tax dependents. Use funds on anyone you claim on your Federal Income Taxes, even if they are not covered on your health plan! NOTE: If funds are used on a non-qualified expense, taxes and (if you’re under 65) a 20% penalty apply.
  12. 12. You, a family member, or your employer can add money. You can contribute via payroll deduction, or on your own. Your employer may contribute a defined monthly amount as part of their benefits offering. $
  13. 13. There’s a limit to how much can be contributed each year. 2019 FAMILY MAX $7,000 2019 INDIVIDUAL MAX $3,500 ($3,450 in 2018) ($6,900 in 2018) You can contribute an additional $1,000 if you’re 55 and older. The total funds put into your account (by you, your employer, and/or family) must not exceed the annual limit. The same $1,000 “catch up” contribution applies!
  14. 14. But there’s no time limit for reimbursing yourself. As long as you had an HSA when you incurred the qualified health expense, it makes no difference how much time has passed.
  15. 15. To be eligible, you’ll need a High Deductible Health Plan (HDHP). In general, deductibles and premiums are inversely proportional. High deductible = low monthly premium Low deductible = high monthly premium
  16. 16. Your monthly premium is like paying gym membership dues. You pay a monthly fee whether you use it or not.
  17. 17. Why pay higher premiums to the insurance company? for example, on a PPO when you could put that money in your HSA for future use So, the idea is…
  18. 18. 2019 INDIVIDUAL OOP MAX $6,750 2019 FAMILY OOP MAX $13,500 This is how much money you have to pay out-of-pocket (OOP) before your insurance will start to pay a portion of costs. Here’s what a High Deductible Health Plan looks like. $1,350 2019 MINIMUM FAMILY DEDUCTIBLE $2,700 The out-of-pocket (OOP) maximum represents your worst case financial exposure in a given plan year. Your OOP max may even be as low as the minimum deductible (shown above) depending on your plan! 2019 MINIMUM INDIVIDUAL DEDUCTIBLE (no changes from 2018) ($6,650 for 2018) ($13,300 for 2018) Even if your employer doesn’t offer an HSA, assuming you’re eligible, you can open one yourself at your bank.
  19. 19. You pay all costs out-of-pocket until you hit your deductible.
  20. 20. The OOP maximum represents a worst case scenario. If you hit the out-of-pocket maximum, your plan pays 100% of in-network costs for the remainder of the plan year. LIMIT
  21. 21. In-network providers have agreed to pre-negotiated, lower rates with your insurance carrier. Using in-network doctors, services, and healthcare providers also ensures what you spend gets applied towards your deductible and OOP maximum.
  22. 22. HSAs primarily benefit healthier people with low medical costs. (Remember: even if something major happens, the out-of-pocket max limits your financial exposure).
  23. 23. There are times when an HSA might not be the best option. If you expect high healthcare expenses in the year ahead, consider whether a low deductible, richer coverage plan might better meet your needs.
  24. 24. You can’t contribute to an HSA and have a Health Flexible Spending Account (FSA) at the same time.
  25. 25. You can still have a Limited-Purpose FSA.
  26. 26. You can also still have a Dependent Care FSA. You (and your spouse if filing jointly) must have W-2 earned income during the year. See IRS publication 503.
  27. 27. Your HSA is used like a debit card, so spending money is easy. Your HSA vendor should provide you with a card when you open an account. This spending card works exactly like a debit card and is linked to the funds in your HSA. HSAHSA
  28. 28. Use your card to pay for qualified health expenses, copays, and prescriptions. Reminder: you’re paying 100% out-of-pocket until you meet your deductible. Then insurance kicks in to pay a portion of the costs.
  29. 29. Or, pay yourself back from your HSA account. Reimbursement is as easy as a bank-to-bank transfer. You can also retroactively reimburse yourself if you paid for a qualified health expense but didn’t have money in the HSA account at the time.
  30. 30. You don’t have to use your HSA funds just ‘cuz you’ve got them. You can choose to pay for your qualified health expenses “on your own” and let the funds in your account build to 1) use on future expenses, or 2) reimburse yourself in the future.
  31. 31. Even if you no longer have a high-deductible plan, you can still use your HSA funds. You just can’t contribute to your HSA if you’re no longer on an eligible health plan.
  32. 32. You also can’t contribute to an HSA if you’re enrolled in Medicare. Retirement heads up: if you’re 6+ months beyond your full retirement age (66) when you apply for Social Security, you’ll get 6 months of “back pay” in benefits. To avoid penalties on your HSA, stop contributing 6 months before you apply.
  33. 33. Once you’re 65 or older, you can use HSA funds for any reason. Taxes will apply for non-qualified health expenses, but there’s no longer a 20% penalty. the great news is
  34. 34. Generally, HSAs can give you more control over your medical spending. Your costs more closely reflect your actual healthcare needs. (Plus, you never pay federal taxes on qualified expenses).
  35. 35. Pairing an HSA with an HDHP can help you save money.
  36. 36. Keys to savvy spending 1. Stay in-network to avoid large out-of-pocket costs. 2. Consider generic instead of brand name drugs. 3. Make use of preventive care to stay well. It’s 100% covered by your health plan! 4. Ask about pricing before agreeing to services. 5. Read “10 Tips to Reduce Your Healthcare Costs”.
  37. 37. For more HSA information, visit: THANK YOU. THAT’S A WRAP.
  38. 38. Our Story Once a year, an employee is asked to make a complicated, high stakes decision that could impact their life, financial wellbeing, and the lives and health of their families. Lumity was founded by two friends who thought they’d chosen well. And, in hindsight, they would’ve made different choices. Lumity’s mission is to help employers and employees choose better. We combine data and expert benefits support so employers pay fair rates and their people have better outcomes. Senthil Nagarajan, COO Tariq Hilaly, CEO Artwork credit: One of our account managers, Gabbie Feuerbach, created oil paintings of our founders for our 4 year anniversary in June ’18. (To our delight, Gabbie painted them on cornhole boards for our company BBQ!).