Health Savings Accounts (HSAs)

montage of photos for health savings accounts

 

Health Savings Accounts (HSAs) were created in 2003 to enable individuals, who are covered by a High-Deductible Health Plan (HDHP), to save and spend money to pay for their out-of-pocket health care expenses without the money ever being taxed.  Generally, an adult who is enrolled in, and covered by, a High-Deductible Health Plan (HDHP), and has no other first-dollar medical coverage, may open and fund an HSA with pre-tax payroll deducted contributions.

Like savings and checking accounts, HSAs are personal bank accounts owned by individuals; not the employer or insurance company. HSAs are a type of consumer-driven health plan, where individuals and families have a direct and vested interest in how dollars are spent for their healthcare.

Each year, the Internal Revenue Service (IRS) sets and announces the inflation-adjusted limits for HSAs and HDHPs . These limits include:

  • The maximum HSA contribution limit;
  • The minimum deductible amount for HDHPs; and
  • The maximum out-of-pocket expense limit for HDHPs.

On April 29, 2016, the IRS announced the 2017 calendar year requirement, including deductibles at least $1,300 for an individual or $2,600 for a family, and Out-of-Pocket maximums no greater than $6,550 or $13,100, respectively.

Higher deductibles typically afford employers and employees savings on insurance premiums. While the savings results in higher out-of-pocket expenses for the employee and their families, they can pay for those eligible expenses with tax-free funds from their HSAs. Unlike other types of the tax-advantaged accounts, there are no “use-it-or-lose-it” provisions with HSAs. Funds can accumulate indefinitely over time, or employees can withdraw money from their accounts as needed, for qualified medical expenses.

 

In some cases, HSAs can work alongside other qualified “cafeteria” plans, such as Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSA).

 

HRAs can help employees pay for the care they and their families need.

 

For more information about HSAs & HDHPs contact our Employee Benefits Team at:

(360) 779-4448     |     benefits@ehlinsurance.com