I’d like to talk to you today about Health Savings Accounts, otherwise known as HSAs. An HSA offers many advantages when you know how to use them the right way. They are the last great tax-advantage savings vehicle that you and I have as consumers.
Thinking of Health Savings Accounts the Right Way
Some people have a misunderstanding about HSAs. They think that to have an HSA, you must be covered by a high-deductible health plan. Just because you have a high deductible plan on your health insurance does not mean you’re eligible to open an HSA. It must be a qualified HDHP or High Deductible Health Plan.
The kicker about health insurance is that during the time you’re paying your healthcare costs before you reach the amount of your deductible, you don’t have any copay benefit. You don’t have an office copay benefit, you don’t have a prescription drug copay benefit. You pay the full cost. Whatever your deductible, you’re responsible for those expenses.
Now, having that plan design should lower your monthly premium. That premium is your fixed expense that you pay month in, month out just to be insured for catastrophic care.
Setting Up a Health Savings Account
To set up a Health Savings Account, you’d want to put money into a qualified account with your area bank or credit union or someplace where you won’t access it. The government says the money you put into it goes into that account tax-free. You can then use the money immediately and tax-free to pay for your qualified healthcare expenses.
Best Ways to Pay Into Your Health Savings Account
The best way to use an HSA is to open it as soon as possible and begin monthly, systematic accumulations.
You have the option to wait until after you have a claim to pay into your HSA. Maybe you have a $1,000, $2,000, or $3,000 medical expense. Put the money in your HSA and then pay it from the HSA. Therefore those funds become tax-deductible. When you take the money out, it’s a tax-free distribution to pay that bill.
Some people find it advantageous to build up this fund on a monthly basis, beginning with a $100, $200 or $300 a month contribution. This process builds up a savings account that you can use when you need a prescription, doctor’s visit or a covered surgery.
Therefore, you can deposit these funds before or after a claim.
Annual Time Limits on HSA Payments
You have until April 15th to fund your prior year’s HSA limit. In other words, you have until April 15th of the year 2023 to pay for your 2022 HSA contribution if you were covered by a High Deductible Health Plan in 2022. Then, to continue your contributions, you must stay in a High Deductible Health Plan.
In 2023, if you qualify for Medicare, you may have a limited use of your HSA for that time, when you use Medicare.
There are a lot of advantages accompanying a Health Savings Plan. The biggest ones are the tax-free nature of the money and getting the lowest health insurance premium. If you have any questions or want to talk about this further, call Mbhealth, a leading Illinois and Missouri insurance broker. Our phone number is 314-544-5400 or contact us here.