You may already have a Health Savings Account (HSA) with your insurance plan, but you might be a little uncertain about how these accounts work.
Welltuned spoke to Melissa Pell, who manages consumer-driven health products at BlueCross BlueShield of Tennessee, to learn more about HSAs and how they work.
“HSAs are a great way for individuals to pay for today’s medical bills and to save for future medical expenses,” Pell explains. She uses her HSA to pay for every day medical expenses. And when she was pregnant with twins, she used the savings she had built up to pay her pregnancy-related medical bills.
An HSA is a savings account offered in conjunction with a qualified high-deductible health plan (HDHP). The account allows you (and your employer, if they contribute) to set aside money to pay for your health care expenses. You can use an HSA to pay for things like prescriptions, doctor’s visits and copays, physical therapy and some types of medical equipment.
Pell says there are 6 important facts you should know about HSAs:
1. There’s no use-it-or-lose-it rule.
An HSA allows you to roll over the money in your account from year to year (which is different from an FSA or flexible spending account, which does not). You don’t have to rush around in November or December, frantically trying to spend the money you’ve saved on random medical expenses. “The entire amount that is unused is carried over, just like a regular savings account,” says Pell. “It continues to earn interest.”
2. It doesn’t affect what doctors you can see.
An HSA doesn’t impact who you pay, only how a health insurance claim is paid, says Pell. Your health plan’s provider network tells you which providers you can see to access your in-network benefits.
3. It’s portable.
Your HSA goes with you even if you change jobs. The money you’ve invested and that your employer has invested is yours to keep. In fact, you can still use the funds even if you’re not enrolled in a high-deductible health plan any longer; however, you can’t contribute any more money to the HSA if you’re no longer enrolled in an HDHP.
4. There are tax benefits.
When you contribute money to an HSA through a payroll deduction, you’re setting aside money that is not subject to income taxes. (If you contribute to the HSA outside of payroll deduction, your contributions are tax deductible.) The interest you earn on the account is not taxed. And when you withdraw money from your HSA, you will not have to pay taxes on it. “It’s like a triple benefit – contributions, growth and withdrawals are all tax free as long as the money is used on qualified medical expenses,” Pell explains.
5. There are annual limits to your contributions.
For individuals, the maximum allowed contribution is $3,550 in 2020. For families, the max is $7,100. However, if you are 55 or older, you can contribute an extra $1000 per year above that maximum limit. “I would encourage people to get as close to the maximum as they can contribute,” says Pell.
6. You should designate a beneficiary.
You may not realize that you can choose a person to inherit your HSA upon your death. Pell recommends that you choose a beneficiary as soon as you set up your HSA. Note: the IRS does treat the HSA differently, based on whether or not your spouse is your chosen beneficiary.
Here are some of the many medical expenses you can pay for with your HSA:
- Doctor visits
- Glasses and contact lenses
- Surgery and procedures
- Diagnostic devices, such as glucose monitor
- Breast pumps and supplies
- Oxygen equipment
- Mental health services
Here are some of the things you can’t pay for with your HSA:
- Nonprescription drugs or medicines
- Health club dues
- Cosmetic surgery
- Teeth whitening
- Weight loss program (unless for a specific disease diagnosed by a physician)
For a more comprehensive list of what you can and cannot use your HSA for, visit the IRS site.
Get more information about specific health terms, topics and conditions to better manage your health on bcbst.com. BlueCross BlueShield of Tennessee members can access wellness-related discounts on fitness products, gym memberships, healthy eating and more through Blue365®. BCBST members can also find tools and resources to help improve health and well-being by logging into BlueAccess and going to the Managing Your Health tab.