HSAs fund your health care needs

The HSA is first and foremost designed to fund health care expenses in conjunction with your high deductible health plan (HDHP). A qualified HDHP is required to set up an HSA. The HSA is a savings account that secures pre-tax dollars in a fund for future medical needs. This helps you cover the deductible on your health insurance plan with pre-tax dollars.

HSAs utilize pre-tax funds

HSAs may be set up through your employer directly or your own through financial institutions like banks, insurance companies, or third-party administrators. Contributions to HSAs by your employer are set up as pre-tax investments. HSA accounts created through financial institutions are designed so that consumers can take an “above-the-line” deduction on personal taxes. The benefit being that your taxable income is decreased, so fewer taxes need to be paid out.

HSAs may come with significant premium savings over traditional insurance plans

High deductible health plans come with much lower premiums than a traditional plan offering the same coverage. This would be especially apparent to someone who pays premiums all year long but doesn’t actually go to the doctor or utilize medical services very often. For someone like this, premiums can feel like money out the window.

HSAs offer expanded coverage options for consumers

Unlike typical insurance plans that have a highly negotiated list of medical products or services that are actually covered, HSAs can cover many additional health-related expenses. So doctors’ visits, hospital expenses, and prescriptions are covered, but coverage also extends to some dental and vision services, and certain “non-traditional” treatments such as acupuncture and deep tissue massage. Just be sure that these services are medically necessary and prescribed by your physician.

Because an HSA is a “cash” account, it empowers consumers with an option to negotiate pricing on many medical services, which can lead to substantial savings on medical expenses. For example, standard imaging services can vary widely in price depending on location and payment method. An MRI, for example, can cost anywhere from $400 to $1,800 for the exact same service. If you have money saved in your HSA to pay for your service upfront, you provider may negotiate a lower price.

HSAs offer control and choices regarding health care needs

With these plans, consumers have unlimited choices regarding services, service providers and medical expenditures. With an HSA, one can go to the doctor of his or her choice because the HSA account itself is not subject to in or out-of-network service. In this case, it is still important to remember that your health plan is subject to a provider network, so if there is a case when you need to see a provider out-of-network, having HSA savings can help cover the out-of-pocket expenses since the health plan will have little or no coverage.

HSAs are portable

If you switch jobs, the HSA account goes with you. And, unlike other plans, such as Flexible Spending Accounts, you do not lose unused funds in these accounts at the end of the year. The consumer “owns” this account and all benefits that come from its good management.

HSAs create financial incentives for managing your health care expenses

There are always unfortunate cases where a catastrophic event occurs and emergency medical services are required that do not allow time to “shop around.” But the majority of medical needs faced in the course of your lifetime are more predictable. Since the HSA is a consumer-controlled cash account, you can benefit from considering whether a particular expense is worth it or if a cheaper alternative, like a generic medication instead of name brand, might work just as well.

HSAs are a powerful tool for retirement investing

Over time, a relatively healthy person or someone who is a decent financial manager can save a good deal of money and investment earnings in an HSA. Consumers who are between the ages of 55 and 65 also have the opportunity to make additional “catch-up” contributions (up to $1,000 extra) to the fund. Increased access to this fund begins at age 65. The account can continue to be used for medical expenses with no penalties, but withdrawals for other purposes are also possible (after age 65) and often face fewer penalties than withdrawals from an IRA.

HSAs are easy to use

Most HSAs will come with a debit card just like an FSA so you can easily use your accrued funds at the point of sale for qualified goods and services. If your HSA carrier also offers a mobile app or website to manage your HSA, you’ll be able to access your account anytime, anywhere you have internet service.