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COVID-19 and Beyond – Why HSAs Work for Everyone

Ray Hill
Apr 15, 2020 8:00:00 AM

Whether during the coronavirus pandemic or in “normal” life, health savings accounts are good for everyone. It’s a bold statement, but a true one—based in facts we’ll explore in this post.

Regardless if an individual is young and new to the workforce or quickly approaching retirement, an HSA can play a critical role in helping them take control of their healthcare costs while bettering their short and long-term financial health. This is especially true for anyone who’s lost their job or dealt with other employment-related challenges due to the COVID-19 crisis, since HSAs are portable and can be brought along to their next employer or maintained independently. More on that below.

Despite all this, as a broker, you may think that HSAs are only viable options for certain demographics—the very healthy, very sick, very young or very old. That’s simply not the case. HSAs work for everyone, regardless of age, income level or health circumstance. Let’s look at how and why.

HDHP + HSA = A Powerful Combination for Anyone

Combining an HSA-eligible high-deductible health plan (HDHP) with a health savings account is a simple equation with a powerful outcome for those of all ages, income levels and health circumstances. Using an HSA with an HDHP allows accountholders of all kinds to take full advantage of three types of tax savings, while also having a dedicated savings account to use for present and future medical expenses. Even better, health savings accounts like Bend HSA allow for tax-free account growth through interest and investment opportunities.

Let’s take a moment to break down why an HDHP plus HSA is such a powerful combination for anyone who leverages the two together.

First and foremost, the most lucrative HSA advantage is its “triple tax savings.” What that means is that accountholders save on taxes in three ways:

  1. HSA contributions are 100% tax deductible
  2. HSA funds can be used tax-free for any qualified medical expenses
  3. HSA funds grow tax-free

Along with these important tax advantages, there are many other HSA benefits you as a broker can use to sell HSAs to your clients. Using an HSA with an HDHP offers flexibility and convenience to all kinds of accountholders in a number of ways—many of which are critical for individuals dealing with the coronavirus pandemic:

  • HSAs are portable–As mentioned at the start of this post, HSAs are portable and remain with their accountholders no matter what, regardless of job changes, health insurance plan changes or even retirement—and including job loss or employment impacted by COVID-19. The contributions in their HSAs will always remain available to use for qualified medical expenses in the same tax-advantaged way as the day they set their HSAs up, and they can bring their HSA to their next employer or maintain it independently with an HSA administrator like Bend.
  • HSAs allow for rollovers–Accountholders will never be faced with a “use it or lose it” scenario when it comes to their HSA contributions like they do with many other tax-advantaged accounts like FSAs. Any funds left in their HSAs at the end of the year or after a job or insurance plan change roll over indefinitely with no penalties.
  • HSAs can be used for a variety of healthcare costs–You and your clients might be surprised when you see all the “qualified medical expenses” accountholders can pay for using their HSA funds. Everything from ER visits and surgical costs, to dental expenses, mental health services, vision care and prescription drugs, can all be paid for using an HSA. And now, with the Coronavirus Aid, Relief and Economic Security Act (CARES Act), accountholders can even use their HSA to purchase over-the-counter medications and supplies, including menstrual care products like cups, liners, pads, sponges and tampons.
  • HSAs offer an ever-expanding preventive care list–The IRS continues to expand the list of what qualifies as preventive care for HSA participants, and now includes care for many chronic conditions, as well as testing for COVID-19. What this means is that HSA accountholders can bypass their deductible and receive immediate benefits for any care that falls under preventive care. This can equal substantial annual savings, especially for those managing chronic medical conditions. And it’s important to note, it’s not just medical care that’s covered as preventive—it’s also items purchased like prescription drugs.
  • HSAs allow for multiple contributors–HSA contributions don’t just have to come from the accountholder. Employers can also contribute to HSAs, as well as a family member, or really just about anyone else. Keep in mind, there are IRS limits in place for the total amount of HSA contributions combined based on account type (and accountholder age), but it’s still a great advantage to be able to fund contributions from multiple sources.
  • HSAs provide accountholders with an additional investment vehicle–An industry-leading HSA account like Bend HSA provides the ability to invest HSA contributions similar to a 401(k), helping accountholders save more for retirement. And in fact, should they decide to use their HSA contributions for other purposes after retirement, they can do so without penalty after they turn 65.

HSAs Counteract the Long-Term Impact of Rising Healthcare Costs

Rising healthcare costs continue to impact employees and employers. More costs are getting pushed to employees as premiums rise and the out-of-pocket costs for healthcare steadily jump. Employers are being forced to cut other expenses, reduce wage increases and oftentimes reduce health insurance benefits altogether.

But HSAs can provide a much-needed win-win for both employees and employers.

HSAs counteract the long-term impact of rising healthcare costs on both sides. Employers can control their costs through an effective employer-sponsored HSA program, and employees benefit from lower premiums and more control over their own healthcare, short and long-term, plus the triple tax advantage and other benefits that come along with having an HSA.

HSAs are the Best Way to Build Equity for Future Healthcare Expenses

It’s always a good idea to plan ahead, and it’s never too early to plan for retirement. Regardless of an accountholder’s age or proximity to retirement, if they invest wisely in their HSA, it can pay off in more ways than one. Not only are HSAs the best way to build equity for future healthcare expenses—quite frankly, they’re the only way to do so in such a tax-advantaged manner.

The more an accountholder contributes to their HSA, combined with the tax-free growth of their HSA investments and interest, the more they build equity and set themselves up to be able to fund their future medical expenses exclusively through their HSA. In fact, with the right HSA strategy, an accountholder won’t even need to tap into any of their other investments for medical costs in retirement—meaning their 401(k), IRA, pension or other funds will be freed up to be used for all the other expenses that come with retirement.

And when you consider that a married couple will on average need $285,000 for medical expenses throughout their retirement, you can see just how important it is to educate your clients on HSAs as a long-term investment vehicle beyond just a fund for yearly medical costs.

Now More than Ever, Help Your Clients Leverage the Next Generation HSA

With Bend HSA, you help your clients take advantage of all an HSA program can offer—without adding to their workload or causing additional headaches in an already difficult time. We offer a simple-to-use, secure health savings account with a superior user experience and unmatched customer service and support—for clients and customers of all ages and income levels. Because remember, HSAs work for everyone.

Connect with us today and let’s build HSA programs for your clients together.

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