In today’s market, High Deductible Health Plan (HDHP) and Health Savings Account (HSA) popularity continues to increase as companies look to control rising healthcare costs. However, some employers are still hesitant to offer a HDHP-HSA because they do not fully understand how it may benefit their employees and their company. Often times, if a company does offer a HDHP option, many employees enroll in that plan option because of the lower price, but never set up a Health Savings Account (HSA) to go with it. It is common for employees to focus on their increased paycheck, and miss the opportunity to save for the future and/or meet the higher deductible. Our mission is to help companies and their employees fully understand what a HSA is, how it can be used and how it can benefit them. Today we are going to start with the basics.
What is a HSA
Simply put, a HSA (Health Savings Account) is a tax-favored savings account created for the purpose of paying medical expenses.
Who is eligible?
To get the benefits of a HSA, the law requires that the savings account be combined with a qualified high deductible health insurance plan which usually costs less than other health insurance plans. In 2019, the minimum annual deductible of a HSA-qualified plan for an individual is $1,350 and $2,700 for a family. The out-of-pocket max is $6,750 for an individual and $13,500 for a family. – Please note that you do NOT have to be enrolled in an employer-sponsored plan to have a HSA. Some individual health plans offered through the marketplace or purchased directly from carriers are also HSA-Qualified.
What are the benefits for EMPLOYERS?
- Reduced Taxes
- Employer contributions to HSAs are deductible. In addition, these contributions are not subject to social security tax. This means employers save on every dollar they contribute to a HSA on behalf of an employee.
- Cost Management
- HDHPs offer employers a way to reduce premium rates, thereby buffering the rising costs of healthcare, even if they make contributions to HSAs on behalf of their employees.
- Talent Recruitment
- HSAs are attractive to workers. Companies of basically any size can afford to offer HSAs and attract talent in a competitive market. Moreover, a cash contribution to employee HSAs is a tangible benefit likely to be extremely popular among employees.
- Budget Reallocation
- The money saved by offering an HSA-HDHP plan can be used to tackle other business projects and to help the business grow.
What are the benefits for EMPLOYEES?
- Triple Tax Advantage
- Contributions to the HSA are 100% deductible (up to the legal limits listed below) just like an IRA.
- 2022 Individual Contribution Limit: $3,650
- 2022 Family Contribution Limit: $7,300
- Withdrawals to pay qualified medical expenses, including dental and vision, are never taxed. Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free.
- Contributions to the HSA are 100% deductible (up to the legal limits listed below) just like an IRA.
- Flexible Contributions
- Employees can change the amount they contribute as needed to accommodate their lifestyle and financial needs.
- Individually Owned
- HSAs are owned by the employee. This means that if an employee leaves a company, they can take their HSA with them.
- Cost Management
- HSAs provide a way to cover out-of-pocket healthcare expenses until (and even after) an insurance deductible has been reached.
- Roll-Over
- Unlike a flexible spending account (FSA), unused money in your HSA isn’t forfeited at the end of the year; it continues to grow tax-deferred.