Health Savings Accounts are an affordable alternative to traditional copay health insurance and can be used to battle rising medical costs. HSAs are tax-exempt accounts in which you accumulate savings to pay for eligible medical expenses. HSAs allow you to have lower insurance premiums (through affordable high deductible health plans) while often decreasing your out-of-pocket maximum. Your HSA can be used to cover small and routine medical expenses, as well as large medical bills, until your deductible is met.
Individuals covered by HSA qualified HDHPs (high deductible health plans).
Additionally, you must also not be covered by any disqualifying health insurance coverage which includes, but is not limited to:
- Health insurance coverage that has a copay, or "first dollar" coverage, before the HDHP deductible is met. (Eligible preventive care covered on your plan will not disqualify you-i.e. immunizations, annual physicals, etc.)
- Being enrolled in any part of Medicare
- A Flexible Spending Account (Flex, FSA, Cafeteria Plan), even if it is your spouse that carries it
- You may not be listed as a dependent on someone else's tax return
A health plan is generally considered an HDHP by the IRS in 2021 if the plan meets the following requirements for annual deductible and out-of-pocket expenses.
Regardless of your HDHP deductible, you are allowed to contribute up to the annual maximums below as long as the HDHP coverage was effective on December 1 or before. If you are eligible for only part of the year and contribute the full contribution amount, you must carry the HDHP coverage for the entire following calendar year, or pro-rating rules apply.
Single Coverage: $3,600
Family Coverage: $7,200
- HSA contributions made by employer or employee through payroll are 100% tax deductible.
- If used for qualified medical expenses, HSA distributions for expenses incurred after the HSA is opened are never taxed.
- There is no "use-it-or-lose-it"provision with HSAs, so unused HSA balances simply roll over from one year to the next. At age 65, funds remaining in your HSA may be used for retirement income (non-medical expenses), penalty-free. Distributions for ineligible expenses prior to age 65 are subject to standard income tax plus a 20% penalty.
- You own and control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer for substantiation or reimbursement.
- In addition to the eligible expenses covered on your health plan, you can use your HSA for doctor's office visits, prescriptions, etc. You are also allowed to use your HSA for certain expenses that your health insurance may not cover. Examples of these expenses include chiropractic care, Lasik eye surgery, dental cleanings and x-rays, orthodontic work, eyeglasses, and contact lenses.
- Any interest earned in your HSA is not subject to tax.
- Your funds are portable and remain with you even if you switch jobs, change insurance coverage, are unemployed, move, have a change in marital status, or obtain future medical coverage. The funds in your account go wherever you go. You're never at risk of forfeiting the money in your HSA.
- Checks - Checks are available upon request and can be used to pay for qualified medical expenses.
- Statements - You choose to receive either a monthly electronic statement, or a quarterly paper statement detailing all of your transactions. If you have written checks, you will receive images of the checks with your statement.
- Debit MasterCard® - A Debit MasterCard® will be available to you upon approval. This card can be used for your convenience to make purchases anywhere where qualified healthcare expenses are sold and MasterCard® is accepted.
- Interest Rates - The HSA will earn a very competitive, tax-free interest rate.
- Other Services - You will have access to your HSA account balances and activity by enrolling in Premier Banks Online Banking and Mobile Banking. You also have access to your account balances and activity by calling our 24-Hour Telephone Banking service (1-651-779-2900).
- Lower Premiums as employees become more accountable for health costs.
- Insulate loss ratio-Since deductibles are higher, your ratios are insulated. This results in lower renewal rates year after year on your health plan.
- Reward health-conscious employees with cost savings. Empower employees by giving them a financial incentive to be better and more educated consumers of healthcare. This encourages a more efficient use of health benefits.
- Reevaluating your health plan can add value to your bottom line. Enjoy net premium savings without increasing risk liability.
- Employees’ payroll contribution to HSAs save employers FICA Tax. Payroll is lowered by the amount the employees contribute into their savings accounts.
- Lower Premiums
- Pre-tax contributions
- Tax-free interest earned
- Tax-free distribution for medical expenses
- FICA tax savings on payroll deducted contributions.
- Those that are 55 and older can contribute an additional $1,000 "catch-up" amount per year in addition to the IRS's annually indexed contribution maximum amounts.