by WEX Health
Special Guest Contributor: Justine Burnham
One of the most powerful health savings tools available can also be one of the most confusing—but it need not be confusing any longer. Of course, we’re talking about the health savings account (or HSA). Complicated acronyms and insurance terms tend to muddy the value of this option, which makes the benefits selection process overwhelming and exhausting. Fortunately, National HSA Awareness Day is next week, and things are about to get a whole lot clearer.
After meeting HSA Day panelists Dave, Rebecca and Eddie, you know that people just like you are using their HSAs to live their best lives. You also know that even the most confident health savings account holders didn’t always know how beneficial HSAs are. With that in mind, here are five reasons you should ask your employer about a health savings account—and get one, if possible!—during Open Enrollment this year.
- Free money, or other perks, might be on the table.
As Dave’s and Eddie’s stories demonstrated, many employers offer incentives for having an HSA, including matching contributions or making annual lump sum contributions just for holding the account. Or, as Dave simply and accurately puts it: “That’s basically free money that you can use for medical services.”
The pros of free money are self-explanatory. In Eddie’s case, his employer’s contribution alone was more than enough to cover his regular health expenses. If that’s the case for you, too, then every penny you put into your HSA is money saved for the ever-increasing cost of healthcare in retirement.
- HSA funds are good for more than trips to the doctor’s office.
Far from being inflexible, many health-related expenses are qualified for coverage with your HSA funds. In fact, Eddie noted that his “favorite benefit of the HSA, above all else, is just how broad it is.” In addition to copays and visits to the ER, your HSA funds can be used for sunscreen, glasses, vaccines—even dental work. “The big expenses for my kids were braces,” Dave said. “It’s nice to have that pocket of money that’s dedicated for medical and dental.”
- A health savings account can help you budget better.
Not only does an HSA help you save for healthcare in general, but it can help you organize your entire budget. For example, Dave and his wife total up their medical bills each year. Then, when it’s time to determine their monthly HSA contributions, they set the amount based on the previous year’s expenses and the anticipated needs of their family in the year ahead. For Dave, having separate accounts for his medical and non-medical expenses helps him budget effectively in every area of life.
- Maximum contributions mean that you get to keep more of your money.
After comparing a high-deductible health plan (HDHP) to a plan with a lower deductible, Rebecca realized that the premium of the HDHP was lower and that it eliminated copays after the deductible was paid. A high deductible can be intimidating, but something clicked when Rebecca was comparing the two plans. “Why spend the money paying the insurance company [a higher monthly premium], and why not start paying myself [with HSA contributions] and use it as I need it?” she says.
In other words, Rebecca realized that the funds in her health savings account would help her meet the deductible if she had health expenses—but she wouldn’t be paying for a high premium meanwhile. And because HSA contributions are withdrawn from paychecks prior to income taxes, less of her income was taxable and more money made it into her pocket. The more you can contribute to your HSA, the more you get out of your paycheck.
- The “S” in “HSA” stands for savings.
The funds in your HSA can be used, without penalty, for qualified health expenses today—but the HSA isn’t a “use it or lose it” account. If you don’t spend it all in one year, don’t worry: your money stays in your account. You can also take it with you from job to job, and the more you build it up today, the more you’ll have available for use in retirement. The HSA is an ideal tool for short-term and long-term savings.
Want more great tips? Register for next week’s HSA Day broadcast at www.HSAday.com. Panelists Eddie, Dave, and Rebecca are excited to provide you with great financial health tips that take you from confused to confident, and Her Money founder Jean Chatzky will bring her expertise to the conversation. This broadcast is educational, down-to-earth, and FREE. Don’t miss out! And keep an eye on our blog, because we’re continuing this series with more helpful tips for Open Enrollment. See you next week!
If you have a great HSA story to share, post it on social media using the hashtag #LoveMyHSA to help others learn and for a chance to be featured on the live broadcast.