Healthcare costs continue to rise.
In fact, in 2018 the average annual premium for employer-based family coverage rose 5% to $19,616, and for single coverage, premiums rose 3% to $6,896, according to data from the National Conference of State Legislatures. One way to save money on healthcare costs is through opening a Health Savings Account (HSA) alongside your HSA-qualified medical plan. An HSA offers triple tax advantage, but most people don’t fully understand all of the benefits or how the accounts work.
An HSA allows you to set aside pre-tax dollars in a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse qualified medical expenses you and your family incur. You can make tax-free contributions, grow your balance tax-deferred, and make tax-free distributions for qualified medical expenses. These expenses include doctor visits and hospital stays as well as eyeglasses and contacts, chiropractic care, prescription drugs and more.
Another advantage of HSAs is that they are portable even if you change employers or leave the workforce. Plus, the money you put into your HSA rolls over annually, meaning you always have it available. This provides account holders control, tax savings, and flexibility along with a wealth-building tool. You can open an HSA either through your employer or on your own with First American Bank in conjunction with a high-deductible health plan.
An HDHP is a medical plan that offers lower-cost premiums and higher deductibles in comparison to traditional health care coverage. The monthly premium is usually lower, but you pay more health care costs yourself before the insurance company starts to pay its share. An HDHP is designed to work in conjunction with an HSA. If an HDHP seems like the right option for you, it’s important to set aside the money you would have paid toward your premium to fund your HSA. For example, instead of paying the insurance company $400 each pay period, you pay $250 per pay period and put $150 into your HSA each week. Then, you can use your HSA funds to cover your medical appointments, prescriptions and other qualified expenses when they arise.
An HSA has various eligibility requirements, including:
- You must be covered under an HDHP on the first day of the month.
- You have no other health coverage (certain exceptions apply).
- You cannot be enrolled in Medicare.
- You cannot be claimed as a dependent on someone else’s tax return.
As healthcare costs continue to rise, using an HSA can offer relief. To see how much you could save on medical expenses, try using our Health Savings Account Savings Calculator or Health Savings Account Contribution Calculator. Take a look at your financial situation and then talk to one of our HSA representatives to determine if an HSA can serve you and your family’s healthcare needs and savings goals.