As mentioned in our latest infographic, consumer driven health care is paving the way for more affordable health care options. The problem is that most consumers don’t actually know how to make the most out of these pre-tax benefits. That’s why we put together articles like this one. See below for a thorough break down of Health Savings Accounts (HSAs).
What is the best use for an HSA?
HSAs are growing widely in popularity due to the growing use of consumer-driven, higher deductible health plans being adopted by employers and individuals.
HSAs paired with that type of plan are the best accounts to use because of its flexibility, high annual contribution limit, and that it is a personal account for each individual. The HSA account was made to pay for the daily medical expenses that an individual or family member may incur and to do so on a completely tax-free basis.
Who is the ideal HSA user?
The beauty about an HSA is that it is non-discriminatory as to its benefits. It benefits all users. Young users who may not need medical care right away, can start to build their HSA account on an annual basis to accumulate funds for when they need them. Older users who have regular medical care can reap the tax-free benefits immediately with the contributions that are already in the account.
Those who may not have an over-abundance of monetary assets may contribute a little when and whenever they can to begin to build their funds. There are no minimum contribution requirements so each person can budget based on his or her needs.
What is the easiest way to set up one of these accounts?
This part is easy. Reach out to PrimePay :)
Many individuals may go to their own personal banks and ask to open an HSA account. If the individual is employed, their employer will often easily make the HSA account opening process a breeze. Look for accounts that offer easy access online features, tools and resources to make the HSA process as easy as possible. Fees are very minimal with an HSA account but the individual should review where and when account fees may come into play.
In what scenario would an HSA be preferable to a flexible spending account (FSA)?
If an individual is enrolled in a health plan that qualifies for an HSA, then an HSA is preferable. In this scenario, the HSA just has many more overall features and benefits to an individual than what an FSA can provide.
If an individual is enrolled in any other health plan other than an HSA-qualified plan, an FSA is a very rewarding and beneficial account to enroll in to pay for medical expenses on a tax-free basis. In this scenario, the HSA would not even be an option.
Should someone have both accounts (if possible)?
In some cases when an individual has both medical expenses but also many dental and vision expenses, an appropriate election might be to enroll and contribute to an HSA but also make an annual election for a limited-purpose FSA that is designed to cover only the dental and vision expenses. This is a popular option when an individual has some considerable, expected expenses in the coming year.
What regulatory changes would affect the use of HSAs or FSAs?
The Trump Administration is poised to elevate HSAs as the ‘go-to’ vehicle for individuals in combatting the higher cost of medical care. President Trump has expressed on several occasions the benefits and elements of the HSA that would make it the most effective tool for Americans to pay for the growing cost of medical care. I see the adoption and use of HSAs growing dramatically in 2017 due to this more-focused communication.
For over 35-plus years, the FSA has helped millions of people with the cost of medical and dependent care expenses. Billions of tax dollars have been saved with the use of this FSA over this time. The FSA remains as one of the most effective accounts to pay for any qualified medical and dependent care expenses and it remains the only other vehicle to be used with any non-HSA plan. The annual limit for the FSA was raised to $2,600 in 2017 which will allow families greater tax savings this year. The annual limit for families for the HSA was raised to $2,600 this year as well.
If you’re ready to get started with HSAs, FSAs or any other pre-tax benefit, click here.