Taking control of health care expenses is on the top of most people’s to-do list for 2018.  The average premium increase for 2018 is 18% for Affordable Care Act (ACA) plans.  So, how do you save money on health care when the costs seems to keep increasing faster than wage increases?  One way is through medical savings accounts.

Medical savings accounts are used in conjunction with High Deductible Health Plans (HDHP) and allow savers to use their pre-tax dollars to pay for qualified health care expenses.  There are three major types of medical savings accounts as defined by the IRS.  The Health Savings Account (HSA) is funded through an employer and is usually part of a salary reduction agreement.  The employer establishes this account and contributes toward it through payroll deductions.  The employee uses the balance to pay for qualified health care costs.  Money in HSA is not forfeited at the end of the year if the employee does not use it. The Health Flexible Savings Account (FSA) can be funded by the employer, employee, or any other contributor.  These pre-tax dollars are not part of a salary reduction plan and can be used for approved health care expenses.  Money in this account can be rolled over by one of two ways: 1) balance used in first 2.5 months of new year or 2) up to $500 rolled over to new year.  The third type of savings account is the Health Reimbursement Arrangement (HRA).  This account may only be contributed to by the employer and is not included in the employee’s income.  The employee then uses these contributions to pay for qualified medical expenses and the unused funds can be rolled over year to year.

There are many benefits to participating in a medical savings account.  One major benefit is the control it gives to employee when paying for health care.  As we move to a more consumer driven health plan arrangement, the individual can make informed choices on their medical expenses.  They can “shop around” to get better pricing on everything from MRIs to prescription drugs.  By placing the control of the funds back in the employee’s hands, the employer also sees a cost savings.  Reduction in premiums as well as administrative costs are attractive to employers as they look to set up these accounts for their workforce.  The ability to set aside funds pre-tax is advantageous to the savings savvy individual.  The interest earned on these accounts is also tax-free.

The federal government made adjustments to contribution limits for medical savings accounts for 2018.  For an individual purchasing single medical coverage, the yearly limit increased $50 from 2017 to a new total $3450.  Family contribution limits also increased to $6850 for this year.  Those over the age of 55 with single medical plans are now allowed to contribute $4450 and for families with the insurance provider over 55 the new limit is $7900.

Health care consumers can find ways to save money even as the cost of medical care increases.  Contributing to health savings accounts benefits both the employee as well as the employer with cost savings on premiums and better informed choices on where to spend those medical dollars.  The savings gained on these accounts even end up rewarding the consumer for making healthier lifestyle choices with lower out-of-pocket expenses for medical care.  That’s a win-win for the healthy consumer!

With the election of a new President, health care plans and the fate of the Affordable Care Act are a hot topic of discussion. As part of his 7-tier health plan, President-Elect Donald Trump has proposed a shift in the way health savings accounts (HSAs) are offered to working Americans. Simply put, an HSA is a savings account for medical expenses. They are tax advantaged accounts an individual can open in addition to their current health plan to pay out-of-pocket expenses ranging from co-pays to surgery deductibles. Typically, HSAs have been offered to individuals with high deductible health plans (HDHPs). However, if the President-Elect’s new health plan strategy is enacted, an HDHP would no longer be an eligibility requirement, significantly impacting healthcare options for millions of Americans.

HSA vs. FSA – Which one is right for you?

When choosing a savings account for medical expenses there are two options: HSAs and FSAs. Each type of account is generally non-taxable for qualified medical expenses, except under certain circumstances in which a medical expense was incurred prior to opening an HSA, and each is accumulated by contributions from your paycheck. Some employers offer HSA and FSA matching contributions.

In the past, there have been some prominent differences between health savings accounts and flexible spending accounts (FSAs). Traditionally, FSAs have been the option for those who choose health plans with low deductibles. The money you contribute from your paycheck into your FSA account must be spent within the year, and cannot be rolled over. Conversely, you must have an HDHP to open an HSA, and funds accumulated from paychecks can be rolled over into the next year if left unused.

Accumulating tax advantages have made HSAs more popular and beneficial in comparison to FSAs. When it comes to changing jobs, HSAs typically are not affected, while FSAs are impacted due to restrictions in rollover of funds. However, FSAs do not have eligibility requirements, which have made them more widely available to individuals.

What’s Next? How HSAs would change under Trump’s health plan

Trump’s new health plan would make HSAs readily available to everyone by removing the HDHP eligibility requirements that are currently in place. In addition to this drastic barrier removal, Trump has said he will change policy to allow families to share the accounts between one another. Any contribution or interest-earned by an HSA is tax-deductible, and individuals with HSAs can withdrawal money tax-free for certain medical expenses ranging from transplants to acupuncture. The combination of these three tax-advantages creates an unmatched savings option for those who choose HSAs. While Trump has said he will change some factors of HSAs, he plans to keep these tax advantages.

Who will benefit from the new HSA model?

In the past, HSAs have been more attractive for retirees. Health care costs tend to rise in the retirement stage of life, which makes an HSA a more cost-efficient option for retirees. Since individuals are allowed to take out money for medical expenses without being taxed, retirees have the potential to save large amounts of money in the later stages of their life. However, under Trump’s proposed plan, HSAs will also become increasingly attractive for younger people. Because individuals will continue to be allowed to roll over money contributed to their HSA in a given year into the next, young and healthy people will be able to save sizable amounts for use later in life.

While much remains to be seen about which aspects of President-Elect Trump’s health plan will be enacted when he takes office, take the time now to educate yourself on how an HSA can work for you.

By Nicole Federico and Kate McGaughey

Over the past few years, we have seen the cost of health care steadily increase – a trend supported by the latest data from the 2016 UBA Health Plan Survey. During the recession, employers implemented health plans with higher copays, higher deductibles, or offered multiple plans with a variety of deductibles and pushed the cost of the lower deductible plans onto employees in an attempt to keep their costs for offering coverage at the same rate or less.

We also saw the introduction of high deductible consumer-driven health plans (CDHPs), some that also offered the option of depositing money on a tax-free basis into a health savings account (HSA) that could be used to pay for qualified medical expenses.

The HSA plans were very attractive, as many offered 0% coinsurance once the $2,000 or $3,000 deductible had been met and were priced well below other more traditional health plans. The expectation being if the consumer was paying all of their medical costs for the first few thousand dollars, they would be less likely to actively consume health care unless necessary.

It was also a way for employers to reduce premium costs by offering a high deductible plan, and fund an HSA account that an employee could use to pay for qualified medical expenses and essentially self-fund most of the up-front costs to the employee for the medical plan. In many cases, employers were able to offer a richer medical plan by combining the medical plan with HSA contributions, and still save money over their current traditional health plan costs.

What the insurance carrier actuaries did not realize was the impact this funding of the health plan consumer costs was going to have on the utilization of the health plans by the plan members. These low premium health plans were essentially “blown up” with heavy utilization, and the premiums went up so that the carriers could cover the cost of the claims and services being provided.

The insurance carriers are trying to do everything they can to keep premium costs from rising while still keeping the plan benefits within the confines of what the Patient Protection and Affordable Care Act (ACA) says must be covered. It is a balancing act, and one that is not moving in favor of the employees and their dependents.

Plan copays for office visits are holding steady, but deductibles and out-of-pocket maximums are on the rise as are prescription drug copays, which are shifting more and more of the costs to employees and their families. Some carriers are dramatically changing their prescription drug formulary lists, deleting many of the drugs they covered previously, adopting more tiers of prescription drugs, implementing co-insurance instead of copays for higher-cost specialty drugs, and raising copays in all tiers.

Furthermore, the 2016 UBA Health Plan Survey has also shown a reduction in employer funding toward HSAs for employees this past year, and employers are asking employees to take on more and more of the insurance premiums, which again translates into higher costs for employees.

www.originally published by www.ubabenefits.com


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