A health savings account enables individuals to pay for their share of health care with pretax dollars, and by law can only be established in conjunction with a low premium, high deductible health care insurance plan. Employees can save money in the HSA tax-free and draw it out anytime they want to help pay their health insurance deductible, co-pay and qualified medical expenses, including those, like dental and vision, that may not be covered by their health insurance plan. Unlike a flexible spending account (FSA), employees don’t have to spend what they put into an HSA by the end of the year, but can let it accumulate for future medical needs and if they change jobs, their HSA account is portable, which means they keep their account if they leave the company.
In 2017, people with an HSA account can choose to save up to $3,400 for an individual and $6,750 for a family (people 55 and older get to save an extra $1,000 which means $4,400 for an individual and $7,750 for a family) – and these contributions are 100% tax deductible from gross income. People can spend the money in their health savings account on current medical bills or choose to invest their balance to pay for health costs in retirement.
So why aren’t people taking full advantage of these accounts and what makes some better than others? The answer to the first question can be summed up in three words – lack of information. Trying to understand the many aspects of a HSA plan can be daunting. That’s why UnitedHealthcare created HSACenter to help consumers become better informed. The HSACenter includes video clips, interactive calculators to estimate health insurance savings, tax savings and future value with an HSA, an extensive FAQ, and list of qualified medical expenses.
With regards to what makes some HSA plans better than others, this depends on how the account is used. People who use their account to cover current medical expenses should look for an HSA account with a low monthly maintenance fee. For people who view their HSA as a tax advantaged vehicle to save for medical expenses not covered by Medicare during their retirement years, Morningstar suggests they look at the variety of asset classes available, the quality of funds based on their likelihood of outperforming benchmarks and the total cost of the funds. In this category, UnitedHealthcare’s Optum Bank was one of four accounts that received overall positive assessments based on the criteria used in the Morningstar report.
Whether it is used to pay current medical bills or those in the future, health savings account plans give people an incentive and tools to better manage their health care costs.