Health Savings Account (HSA)
What is a Health Savings Account?
A Health Savings Account (HSA) is a pre-tax savings account attached to a Qualified High Deductible Health Plan (QHDHP). You can put pre-tax money aside for medical, dental, vision, and prescription expenses. The money in your HSA accrues interest and rolls over from year to year. In other words, there is no “use or lose” rule. The account is also in your name – you can take your HSA with you to a new job and even into retirement.
When a Qualified High Deductible Health Plan (QHDHP) is combined with an HSA, you can:
- Control healthcare expenses.
- Increase tax savings.
- Reduce insurance premiums.
- Enjoy flexibility and portability.
- Save for retirement.
Below is a quick overview of the advantages and disadvantages of an HSA.
- Triple tax savings. The lifetime tax benefits even surpass those of a 401(k).
- Save for future health care expenses. Think retirement, a time when medical expenses typically increase.
- You can use your HSA funds to pay deductibles, coinsurance and copays for medical, dental and vision services for yourself and your eligible spouse/domestic partner and/or dependents.
- If you are age 55 or older, you may contribute an extra $1,000 annually as a “catch up.”
- You own and can take this account with you wherever you go, there are no “use it or lose it” restrictions.
- If you withdraw funds for non-medical purposes prior to age 65, those funds are considered taxable income and a 20 percent penalty is also assessed by the IRS. After age 65, you would only be assessed taxes on the funds.
- It is not always easy to accurately budget for healthcare expenses. Illness can be unpredictable, and information about the cost and quality of medical care can be difficult to find.
- It can be challenging to set aside money to put into an HSA. An older, sicker person may not be able to save as much as a younger, healthier person.
What is the same for all four plans?
- Cigna will cover routine, emergency, and catastrophic care
- Cigna receives the bills and pays providers directly
- Preventive care is covered at 100% and is not subject to deductible
The QHDHP (HSA) Difference!
- You pay lower premiums, but must satisfy a higher deductible in full before payments are made by Cigna
- You must satisfy your deductible before you begin paying copays for your prescriptions
- Your HSA may be used to fund the deductible
- Your unused HSA dollars rollover year to year
Employee Eligibility
An HSA account can be opened under your name if you enroll in the Low HSA or HSA medical plan. You cannot open an HSA if you are enrolled in another medical plan that is not a QHDHP such as Medicare, TRICARE, etc. You can, however, open a Limited Purpose Flexible Spending Account (LPFSA).
Contributions
For 2024, an employee enrolled as an individual can contribute up to $4,150, and an employee enrolled as a family can contribute up to $8,300. In 2025, the limits will be $4,300 and $8,550, respectively. If the account holder is 55 or older by the end of the calendar year, they are eligible to contribute an additional $1,000 per year. You are able to increase, decrease, or stop contributions at any time by reaching out to HR@inserso.com.