Health Savings Accounts: Myth vs. Fact

Myths and facts about the benefits and future of a Health Savings Account

03/18/2014

With the rolling out of the Affordable Care Act, most people have questions about what options they have for saving money on healthcare now and in the future. Health Savings Accounts (HSAs) have long been a tool to save on healthcare, but even before the confusion about the Affordable Care Act arose, they were little understood and underutilized. The following information will help you separate myth from fact when it comes to HSAs.
 
Myth: HSAs are not worth the trouble.
 
Fact: Many people believe that Health Savings Accounts, or HSAs, are more complicated than they are worth and are therefore not a good way to save on healthcare costs. This myth persists because of a general lack of education about their benefits and widespread misinformation. With health insurance deductibles continuously on the rise, HSAs are definitely worth looking into for anyone trying to manage medical bills.
 
“The combination of a high-deductible health plan and an HSA still remains one of the best ways to keep your health insurance costs down while benefiting from the tax breaks that come with them,” states Wiley Long, president of the HSA for America blog.
 
If you’re a taxpayer, you may be eligible to use a HSA in conjunction with a qualified high-deductible health plan (HDHP). If your health plan qualifies, there are several convenient ways to acquire an HSA through your employer or individually, and it’s possible for you, your employer or a qualified third party to make contributions. These tax-free contributions can then be used to pay for qualified medical expenses.
 
Some people receiving additional healthcare benefits, such as through a family member or from the government, may not be eligible for an HSA, so be sure to discuss the details of potential plans carefully with potential providers.
 
Myth: Practically nobody uses an HSA.
 
Fact: Many people falsely believe that HSAs aren’t a popular way to save so they may ignore the HSA portion of their employee orientation or handbook and be discouraged from seeking information about an HSA even if they have medical bills piling up.
 
In fact, HSAs are the perfect savings partner when combined with an HDHP, and HDHPs are predicted to rise in popularity in the near future. This indicates that HSAs may also be set to experience a surge in popularity.
 
“The main advantage of these high-deductible policies is that they’re a lot cheaper than policies that pay benefits sooner, and the premiums don’t tend to rise as much,” states Forbes contributor Erik Carter. “Since premiums have been skyrocketing, these policies have become increasingly popular as a way to hold down health insurance costs.”
 
Myth: HSAs won’t exist long after the Affordable Care Act (ACA) is in place.
 
Fact: Even people who are aware of the ease and benefits of HSAs can be deterred from opening one because they worry it won’t survive the Affordable Care Act. Fortunately, the current outlook is that HSAs will still be available in the new healthcare system.
 
“It appears that Health Savings Accounts (HSAs) will slip under the Affordable Care Act’s threshold for qualified coverage—although just barely,” states Merrill Matthews for Forbes.
“And given the fact that HSAs, and similar high deductible health insurance options, are about the only type of health coverage bending down the [healthcare] cost curve, they may even thrive.”
 
The current situation makes the future of HSAs look very secure. So long as your HSA is combined with an insurance plan that meets the standards of the ACA, you will most likely be able to keep it.
 
Myth: The savings offered by the ACA will make HSAs obsolete.
 
Fact: Learning that HSAs will still be around when the Affordable Care Act arrives is probably not enough incentive to convince you to open one immediately. If you fear that they will cease being a great way to save money, you can put your fears to rest. “In fact, the benefits of having an HSA have actually increased due to the Affordable Care Act,” states Wilely Long.
 
There are several factors that contribute to the improving benefits of a HSA. “The maximum contribution limits have increased, which allows you a higher tax credit for your contributions,” states Long. “In addition, your adjusted gross income (AGI) will be lowered by the amount you contribute. This can actually make it so you have to pay even less for your insurance, as the premiums and out-of-pocket expenses are calculated using your modified adjusted gross income (MAGI).”
 
If you would like to discuss opening a HSA or if you would like to learn other ways to save money on health costs, please give one of our financial experts a call today.

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