Did you know that October 15 is National HSA Day? This day was created to connect the public with the healthcare benefits industry in order to discuss the power of health savings accounts (HSAs) and their impact in fighting healthcare issues facing Americans today. To fully appreciate what the ever-adaptable HSA can accomplish, we must first look at the circumstances surrounding healthcare in today’s climate.
The cost of healthcare
Healthcare costs — and their related increases — can pose a challenge for many of us, but unfortunately, they’re a fact of life. The Kaiser Family Foundation reported a 53% increase in out-of-pocket healthcare spending from 2006 to 20161 and a whopping 200% increase in healthcare plan premiums in workers’ earnings over the 10-year span from 2008 to 2018. Sobering statistics, aren’t they? And that’s just the tip of the iceberg.2
Financial hardships can result in serious healthcare consequences. That same report from Kaiser Family Foundation supplied some staggering data on that subject; for example, one-third of insured adults received an unexpected medical bill within the last two years, and two-thirds of Americans worry about paying those surprise medical bills. Worse yet, 60% of high-deductible health plan enrollees delay medical appointments — even routine care — to avoid healthcare costs, and 29% of enrollees avoid or postpone filling prescriptions for the same reason.
Obviously, sidestepping healthcare takes a toll on one’s health, but avoiding the bills also has its repercussions. According to a 2019 report published by Prudential, nearly one-third of American workers reported financial stress that affected their job performance — and that was pre-pandemic!
Why HSAs matter
While the facts add up to what appears to a bleak equation, there is a positive solution. HSAs allow consumers with a high-deductible healthcare plan to, well, actually plan. An HSA is an economical, flexible, proactive reserve for wellness maintenance and the unexpected.
Economical. Health savings accounts offer a triple tax advantage, which is an amazing benefit. Pre-tax payroll deductions into an HSA are not subject to State, Federal, and FICA withholdings, which decreases taxable income. Meanwhile, the money in an HSA grows tax-free. What’s more, withdrawals for qualified expenses are also tax-free.
Flexible. The beauty of an HSA truly is its flexibility. An account contribution amount can be changed throughout the year according to need, and you have until the tax filing deadline to make a prior-year deductible contribution. And HSA dollars don’t have to be spent the year they were saved; rather, they can earn interest and even be invested until the need arises.* This extremely portable plan follows employees, rather than staying with the employer. At age 65, you can use your HSA funds for anything (just remember that non-qualified purchases are subject to regular income tax).
Your HSA savings can be used for a variety of things, including qualified medical, dental, and vision expenses. COBRA premiums, Medicare premiums (excluding Medigap premiums), and portions of long-term care insurance can also be paid with HSA savings.
Proactive. So, saving to cover typical annual medical expenses makes sense, right? Of course it does, but why stop there? Why not save to cover annual deductibles and out-of-pocket maximums, or — and we call this HSA best practice — contribute to the maximum limit to build a cushion for emergencies, accidents, and retirement healthcare expenses.
Kaiser Family Foundation, FEB, 2018,1 20202
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