Health Insurance 101: HSA's (Health Savings Accounts)

  • By proadAccountId-388931
  • 14 Aug, 2017

How does an HSA benefit me? How do I use one?

Health Insurance 101 is a series in the Lerner, Csernai & Fath Benefits Blog that goes over concepts of insurance to make them easier for you to understand. As always the best source of information is a trained agent.
The moniker surrounding HSA's is that they are a guise from insurance companies that allow them to avoid paying claims until a subscriber reaches a very high deductible, or that they only are beneficial for the young and healthy -  this is FAR from the truth. An HSA account when utilized correctly can be an important tool not only for your health, but also for your finances. HSA accounts prove themselves to be versatile with many uses, and surprising amounts of flexibility with the account.  In order to fully understand an HSA we need to start from the beginning.

HSA accounts were initially enacted as a part of the Medicare Part D (Prescription Drug) legislation that was Enacted by President George W. Bush in 2004. These accounts started with relatively low amounts that individuals and families were allowed to set aside, and these amounts have since grown . How money is set aside into these accounts can happen in two different ways: the employee deposits the money into the account, or the employer deposits the money into the account (note: if an individual/family purchases their health insurance on the exchange they lose the employer deposit option). Contributing to an HSA where an employer offers the benefit to their workforce is very beneficial to both the employee and the employer, this is made possible by having a Section 125 document in place. The employee is able to set their money into their HSA account and avoid paying taxes on the money, and the employer avoids paying their share of the employee FICA (Federal Insurance Contributions Act tax) match.
Now that we know how money gets into this HSA account, how do we get it back out? HSA funds are allowed to be used to pay for what is called 'Qualified Medical Expenses' - fancy term for  MOST medical services. The list of qualified medical expenses is so long that it is actually easier to give you some examples of what is not covered:
  • Toothpaste
  • Daycare
  • Controlled Substances
  • Nail Polish
  • Dental Floss
  • Dietary Foods/Substances
There is also a list of 'potentially qualifying medical expenses' - the rule of thumb on most of these 'potential' services is that they require a prescription from a practicing physician. Most banks that administer Health Savings Accounts make the process of using the funds very simple to the end user (you). HealthEquity is a very popular administer of  HSA accounts in our region and they give each subscriber a debit card and allow for funds to be paid for using this debit card. Simple process.

Now, there is not always a need to remove monies from this account. A very nice feature of an HSA is that contributions and interest (more on this in a bit) rollover year after year! So if we look at myself for an example of this: 21 year-old single male who does not utilize health insurance unless absolutely necessary. If I had an HSA eligible health insurance plan I could contribute the yearly single limit $3,400. This would place my HSA account balance at $3,400 - all of which would be contributed utilizing a Section 125 plan thus allowing me to avoid paying taxes on this money. Assuming I don't have any medical claims that I need to dip into this amount for I would end 2017 with that amount in the account - and I would also start 2018 with $3,400 in the account. In 2018 I can contribute to this account on top of the current account balance achieved in 2017. I would then be sitting on an HSA account just shy of $7,000 in value at the end of 2018. Here is where the cool part about an HSA (in my opinion) comes into play. You can invest the money in your HSA and have it grow for you  tax-free . That is a huge benefit! Given this amount of money is still subject to having to be paid out towards 'qualifying medical expenses' - you get to continually contribute to this account, and watch as your money works for you achieve an investment return. HealthEquity offers a couple different ways in which subscribers can invest their HSA funds, and the best advice I can give is to sit down with a financial adviser who is educated in investments to gain the best advice and knowledge with regard to this function.
Another important feature that often goes unnoticed about HSA's is that once you have the account, you can't lose it. What seems like a simple idea can be kind of confusing - what you mean I can't lose it? It's my money? Let's use an example to explain this, using myself as the subject once again. I have been contributing to my HSA account for two years, and at the end of 2018 I am informed that my employer has made a change in plan offering and is going to no longer be offering  a plan that is HSA compatible. First thought that would come to mind is 'what about all the money in my HSA?' Good news to myself in this situation is: I can still continue to use my HSA account to pay for qualified medical expenses. As it turns out the trigger with an HSA is not about utilization of the account, but rather about contributing to the account.  ANY  health plan can use an HSA, but only HSA compatible plans allow for their subscribers to contribute to an account. So to continue on with my scenario, I could use that $7,000 in my account over however long it takes me to use that much money - as long as I am not in an HSA compatible plan I just can no longer contribute money to this account. 

An interesting scenario to think about is how the continued rolling over and growth of an HSA can lead for ones retirement where their health insurance costs could be very minimal. Year after year contributions to an account, coupled with any potential interest the account may gain can leave many individuals with a sizable account come retirement time. What often happens when an individual retires before they are eligible to enroll into Medicare is they come off their employee sponsored health plan and then have to make due with costs and higher deductibles in the individual health insurance market. This could be a way to combat some premium costs and allow these individuals to enroll in a higher deductible, and lesser premium, health plan knowing they have a savings account waiting for them in the event of disaster. 
Health Insurance can be a complicated product, that's why here at Lerner, Csernai & Fath Financial Group we are willing and ready to help you navigate down the correct path. With the correct guidance Health Insurance can be understood and you can be placed in the correct plan. Our Benefits Division is staffed with staff who deal solely within the Benefits world on insurance, and specialize to serve both individual and group clients in Michigan. Feel free to reach out to us, we are here to help, and WE CAN GET YOU THERE!

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Derek A. Lodholtz, Benefits Specialist
Lerner, Csernai & Fath Financial Group
15505 Waldron Way
Big Rapids, Mi 49307

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The above content is meant to inform and does not convey the opinion of the author (Derek Lodholtz) or the Firm (Lerner, Csernai & Fath Financial Group).

Benefits Blog

By proadAccountId-388931 14 Sep, 2017
This year's annual election period runs from October 15th through December 7th. Now is the time to begin to start thinking about what option is best for you. Of course, a licensed and certified medicare agent is full of information when they meet with you between 10/15 and 12/7! Here is a little bit about the basics of medicare for you to digest between now and then. Also, be sure to register for one of our upcoming events !
By proadAccountId-388931 14 Aug, 2017

 

Lerner, Csernai & Fath Financial Group is sponsoring 2018 Medicare Sales Events!

 

Who?

These events are open to the public – anyone who is on or will be going onto Medicare can come!

 

What?

These events will go over Medicare plans and their structure with opportunity to schedule appointments for plan enrollment with either of Lerner, Csernai & Fath’s two Benefit Specialists!

 

Where?

Our office!

Lerner, Csernai & Fath Financial Group             

15505 Waldron Way

Big Rapids Mi 49307

 

When?

 We have three times to best accommodate you!

 

October 19th, 2017 from 3pm to 5pm

October 26th, 2017  from 10am to Noon

November 3rd, 2017 from 10am to Noon

November 13th, 2017 from 10am to Noon

**PLEASE CALL TO RSVP**

 

Why?

Medicare can be confusing, our Benefits Division at Lerner, Csernai & Fath is here to take that confusion away from you! By coming to see us you can rest assured that you will be educated on the offerings and the enrollment process will be helped along by our licensed and   certified staff members. This all takes place at our local office, which is available to you should questions/concerns ever arise!

 

 

Questions?

Feel free to contact us!

 

                                                                                     

DEREK A. LODHOLTZ                                                     JACQUELINE N. HOLMES

Benefit Specialist                                                                 Benefit Specialist

Direct Line: (231) 629-8628                                               Direct Line: (231) 629-8617

 derek@lernerfinancial.com                                             jackie@lernerfinancial.com 
By proadAccountId-388931 14 Aug, 2017
The moniker surrounding HSA's is that they are a guise from insurance companies that allow them to avoid paying claims until a subscriber reaches a very high deductible, or that they only are beneficial for the young and healthy -  this is FAR from the truth. An HSA account when utilized correctly can be an important tool not only for your health, but also for your finances. HSA accounts prove themselves to be versatile with many uses, and surprising amounts of flexibility with the account.  In order to fully understand an HSA we need to start from the beginning.

HSA accounts were initially enacted as a part of the Medicare Part D (Prescription Drug) legislation that was Enacted by President George W. Bush in 2004. These accounts started with relatively low amounts that individuals and families were allowed to set aside, and these amounts have since grown . How money is set aside into these accounts can happen in two different ways: the employee deposits the money into the account, or the employer deposits the money into the account (note: if an individual/family purchases their health insurance on the exchange they lose the employer deposit option). Contributing to an HSA where an employer offers the benefit to their workforce is very beneficial to both the employee and the employer, this is made possible by having a Section 125 document in place. The employee is able to set their money into their HSA account and avoid paying taxes on the money, and the employer avoids paying their share of the employee FICA (Federal Insurance Contributions Act tax) match.
By proadAccountId-388931 10 Jul, 2017
 Deductibles. Coinsurance. Maximum-Out-Of-Pockets (MooP). Insurance in the public eye has revolved around terms like these for quite some time now, and is sure to as we continue moving forward . When it comes to health insurance there are not numbers that are more important than your deductible and MooP, other than of course your monthly premium to keep coverage active. In my time in the industry there are many individuals who I come across who do not fully understand how these numbers work, how they are structured and how this all stacks up into their maximum health liability. We are going to explore both the Deductible and MooP for you and explain the workings so you can come to your meeting with us familiar with how these work and what you are up against. I find it easy to relate health insurance, when you can, to another popular insurance product: Car Insurance.
Deductible is defined by Investopedia.com as follows:  "A deductible is the amount of money an individual pays for expenses before his insurance plan starts to pay." A deductible is a way for insurance companies to give incentive towards proper usage of coverage. If we relate this to car insurance this deductible functions on Layman's Terms in the same sense as your auto insurance deductible. In both cases you pay the deductible BEFORE the Insurance Company begins to pay. The main difference comes in how deductibles are accrued over the policy term. For auto insurance you pay the deductible every time there is a loss that you want to claim, there is no limit to your deductible expenditures. Health insurance gives you a deductible that spans the entire year, you have one deductible that all of your expenditures (other than premium) stack up against - we will call this deductible 'Box A.' Once you fill up Box A with the pre-determined dollar amount, then you have met your deductible and the insurance company begins to pay out on claims. You may not meet this deductible all at once like you do with an auto insurance claim, it may take you a couple of trips to the doctor before you meet your deductible - remember, though! You only have one deductible all year. You could meet this deductible in January and the insurance company could start paying on claims for the remainder of the year!
By proadAccountId-388931 26 Jun, 2017
 As it started well before last November when President Trump was voted into office, health care reform is one of our Nations hottest topics. In may when a bill was brought to the House floor and pulled it took the wind out of many Americans sails. Since that point there has been a bill passed by the house, and much debating by the Senate which culminated in the Better Care Reconciliation Act of 2017 coming to the public eye last Friday (06/23/2017). There seems to be a division in GOP lawmakers as to where they stand on the bill, if you peruse www.thehill.com  you can see posts that litter the healthcare section detailing how many GOP Senators are not fully confident in the bill or will not vote for the bill. 

 The Bill itself differs from the bill the House of Representatives passed just a while ago, and while there are stark differences in the eyes of some Senators that does not change the reality of this: Time is running out. For a Budget Reconciliation to be able to be applied it must be passed before the end of our Fiscal Year, which ends each year on September 30th. If Congress is unable to pass a decision on healthcare before then it is back to the drawing board. Another detail about budget reconciliation that many are unfamiliar with is how if Congress moves onto a different topic planning to use the same vehicle for amendment, in this case reconciliation, the efforts on prior topics cannot be used again. What this means is as follows: If Congress were to move onto an issue such as taxes/fiscal policy that would signal the end of healthcare efforts for the time being. 

 Senator Mitch McConnell is reportedly pushing for a decision to be made on healthcare soon, and for good reason. Congress takes a recess to celebrate the week of Independence Day, and after that they go on a recess for the month of August, a full five weeks. Once they return from the August Recess the clock is sure to be ticking on healthcare reform. 

 Change is sure to happen eventually, but many differences need to be sorted out, sooner or later, for anything to culminate. Here at Lerner, Csernai & Fath we are keeping our eyes open for any changes in the landscape. Until the a good rule of thumb is to follow all laws that are in place with the Affordable Care Act as no changes have been made official as of now. 

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Derek A. Lodholtz, Benefits Specialist
Lerner, Csernai & Fath Financial Group
15505 Waldron Way
Big Rapids, Mi 49307

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The above content is meant to inform and does not convey the opinion of the author (Derek Lodholtz) or the Firm (Lerner, Csernai & Fath).
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