Employers are increasingly relying on high-deductible health benefit plans to reduce premium costs. And while premiums are lower with a high-deductible health plan than a traditional insurance plan, employees have to cover more of their health care costs before the insurance company pays its share.
To take the bite out and to help employees pay out-of-pocket costs, many employers add a tax-free Health Savings Account (HSA). Contributions to the plan can pay for qualified medical expenses.
HSAs are only offered with high-deductible health insurance plans offering a $1,350 minimum annual deductible for individuals or $2,700 for families with a maximum annual $6,650 ($6750 for 2019) deductible for individuals and $13,300 ($13,500 for 2019) for families. Participants cannot have other health insurance coverage or be enrolled in Medicare. They also cannot be covered by a flexible spending account (unless limited to dental and vison benefits) or health reimbursement arrangement.
Here’s what your employees should know to get the most out of an HSA.
HSAs have a threefold tax benefit: contributions are pre-tax; the HSA funds grow tax-free; and withdrawals are tax-free when used for qualified medical expenses.
For 2018, individuals can save up to $3,450 in their HSA; families can save $6,900. Anyone 55 or older by the end of 2018 can save another $1,000. The money can pay for office visits, copays, deductibles or medicine, as well as dental and vision expenses. Funds that aren’t used can be rolled over for the next year. Participants keep their accounts even if they leave their company. They also can keep the account through their retirement, although they can’t continue to contribute.
It’s essential HSA participants shop around for the best care and the best price because the cost of services can vary drastically. With research, employees can save thousands of dollars. It’s also important to get second opinions after receiving a diagnosis and avoid duplicate tests.
For more tips on maximizing HSAs please contact us.