When looking for your next health plan, an HSA can be an additional option for affordable medical expenses.
As you begin shopping for a new health plan, HSAs can be affordable additions for many individuals and families. A Health Savings Account, or HSA, is a tax-deductible savings account that often accompanies high-deductible health insurance plans. With premiums set at low rates, this type of health insurance can be beneficial for healthy Americans looking for coverage.
If you’re interested in a health plan with an HSA, contact HealthMarkets today. We’ve helped millions of people find the health insurance they need from over 180 insurance companies nationwide.
Our licensed agents are available day or night to help you find the right plan. Since healthcare laws have made it mandatory for most Americans to have health insurance, it’s important to make sure you’re enrolling in the right plan. Our agents can help make sure you find affordable coverage with ease.
How Do HSAs Work?
HSAs work similarly to savings accounts at a bank. You can have money put away in your HSA by setting aside that money yourself or by having it automatically withdrawn from your salary by your employer.
This money is tax-deductible. As long as you use it for eligible health-related fees, you won’t have to pay taxes when you use it.
According to the IRS’s Publication 502, you can use your HSA to pay for a variety of medical services, including:
- Alcoholism treatment
- Birth control pills
- Dental treatment, including x-rays, fillings, braces, and dentures
- Diagnostic devices
- Eye exams and surgery
- Long-term care
- Psychiatric care
- Prescription drugs
- Weight-loss programs
HSAs are typically paired with High Deductible Health Plans, or HDHPs, which are types of health insurance plans with lower monthly premiums but a high deductible.
In 2015, the annual minimum deductible for a qualified HDHP plan was $1,300 for individuals and $2,600 for families. The maximum out-of-pocket amount was set to $6,450 for individuals and $12,900 for families.
While these fees may appear steep, relatively healthy families that use health insurance to cover unexpected emergencies can be comforted in knowing their premiums will be low. For others, HSAs are a small, regular expense that can alleviate the stress of high deductibles. Through planning and budgeting, many families find it easier to cover their out-of-pocket medical expenses with HSA funds.
Advantages and Disadvantages of an HSA Plan
Advantages of an HSA
Mayo Clinic makes note of some potential advantages of an HSA plan that may seem promising to those who are considering this plan:
- You decide how much money to set aside for your healthcare costs: This is important for families and individuals working within a tight budget. You can determine how much or little of your paycheck can be put directly into your health savings account. Saving enough in your HSA can prevent you from dipping into other funds to pay for healthcare services.
- Your employer can contribute to your HSA, but the money is yours: You may be employed at a company that matches how much of your paycheck you set aside for HSA contributions. This also means the money your employer contributed is yours, even after you leave the company.
- Unused money in your HSA will be rolled over to the next year: This means that even if you didn’t need to dip too deeply into your HSA, you still have those funds in your account next year when you re-enroll. Even if you cancel your plan or opt for a different type of plan, you can still use that money to pay for expenses indefinitely.
- Your HSA contributions are tax-free: As mentioned before, any contribution you or your employer makes is 100 percent tax-free. That means if you set aside $50 per paycheck to put into your HSA, all $50 will be added to your balance.
It’s also important to note that with the introduction of the Affordable Care Act (also referred to as the ACA or Obamacare), Americans have more healthcare services covered by their health insurance providers than ever before.
The healthcare laws require insurance companies to use more of your monthly premiums toward necessary health care, including 15 preventive services and 10 essential health benefits. These preventive services include:
- Abdominal aortic aneurysm screening
- Alcohol misuse screening and counseling
- Aspirin use
- Blood pressure screening
- Cholesterol screening
- Colorectal cancer screening
- Depression screening
- Type 2 diabetes screening
- Diet counseling
- HIV screening
- Immunizations, including Hep A and B, HPV, flu, measles, and meningococcal
- Obesity screening and counseling
- Sexually transmitted infection (STI) preventive counseling
- Tobacco use screening and cessation interventions
- Syphilis screening
Your 10 essential health benefits include:
- Prescription drugs
- Pediatric services
- Preventive and wellness services, and chronic disease management
- Emergency services
- Mental health and addiction services
- Pregnancy, maternity, and newborn care
- Ambulatory patient services
- Laboratory services
- Rehabilitative and habitlitative services and devices
Disadvantages of an HSA
Mayo Clinic also includes some potential disadvantages of HSA plans that are important to consider before signing up for one of these plans.
- Unpredictable illnesses make it difficult to budget your healthcare expenses: No one expects to fall seriously ill or need hospitalization. Because of this, it can be difficult to budget out how much of your HSA balance should be used as a safety net and what can be used for a planned service (e.g., vision correction surgery).
- Finding the cost of health care can be a challenge: Without knowing how much a particular medical service is, it can difficult to know how much you’ll have to pay through your HSA or out of pocket until you’re hit with the bill. This is especially true for unanticipated ER visits or emergency care.
- Saving money specifically for your HSA can be hard for families on a tight budget: For some families, it can be easier to manually set money aside for their HSA rather than having it automatically deducted from their paycheck. Additionally, older or sicker Americans are typically unable to save as much money as younger, healthier people.
- It can feel easier to want to save up rather than spend: Because of the threat of paying for health care out of pocket if your HSA balance doesn’t cover the cost, it can feel easier for some Americans to put off seeking medical care in efforts to save up more money in their HSA.
Should You Add an HSA To Your Plan?
By considering the advantages and disadvantages of an HSA plan, you can determine whether it will work for you and your family’s unique health and budget requirements. Because high deductible health plans provide lower monthly premiums and a higher deductible, opting to add an HSA can be an affordable option to have in place for emergencies.
However, for families that expect to visit a doctor or specialist multiple times a year for treatment, health plans like HDHPs may end up costing more out of pocket than the plan may be worth. According to CBS News:
“While a high deductible health plan can lower your overall costs for health insurance but still have you covered for unexpected and large medical costs, be careful to make sure you have the cash on hand to pay the initial out of pocket costs. You'll need to come up with the cash to pay out-of-pocket costs, either from your HSA or from your own savings, to satisfy the deductible before your health insurance coverage kicks in.”
At HealthMarkets, we work to simplify the process for you. With thousands of options available, our knowledgeable agents can compare your unique needs to insurance plans from over 180 insurance companies nationwide to find the right options for you.
Sources: "Publication 969 — IRS.” 2014. | "Medical and Dental Expenses — IRS.” 2014. | "For 2015, Higher Limits for HSA Contributions and Deductible — Society for Human Resource Management.” 2014. | "Health savings accounts: Is an HSA right for you? — Mayo Clinic.” 2013. | "The Benefits of Health Savings Accounts — Quick & Dirty Tips.” 2010. | "Preventive Services Covered Under the Affordable Care Act — HHS.” 2010. | "Is a Health Savings Account right for you? — CBS News.” 2012.