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Midyear Health Plan Changes Now Allowed by IRS–The Perfect Time to Switch to an HDHP with HSA

May 27, 2020 9:00:00 AM

In an effort to provide increased flexibility due to the continued COVID-19 pandemic, the IRS recently announced in Notice 2020-29 that they’ll give employers who provide employer-sponsored health coverage under a Section 125 cafeteria plan the option to allow employees to make midyear health plan changes. This option could play a critical role for many who have experienced a reduction in income or other employment hardships, or for those simply rethinking the health plan choices they previously made. If you fall into any of those categories, it’s worth your time to keep reading.

It’s important to note upfront—this is a one-time change exception for employers and employees, and it’s not mandatory. It’s ultimately up to your employer whether or not they’ll allow this midyear health plan change option.

If your employer does opt in to allowing midyear health plan changes, that means you have the unique opportunity to change health insurance plans even though it’s not an open enrollment period and you haven’t experienced a qualifying life event. You can even sign up for coverage if you’d previously opted out of health plan coverage.

Even better, if your employer offers an HSA-eligible high-deductible health plan (HDHP) that you’re not currently enrolled in, you have the opportunity to make the switch and start your path to better financial wellness through savvy healthcare saving and spending with help from your health savings account.

Lower Costs, More Control Over Your Healthcare, Better Financial Health

If you’ve been hit with reduced income or other financial impacts due to the coronavirus crisis, finding ways to save and make better use of your money is critical now more than ever. And even if you haven’t experienced any major financial setbacks, it’s still a good idea to rethink and refocus your short and long-term financial health. Switching to an HSA-eligible HDHP and leveraging a health savings account with your high-deductible health plan can help you do just that.

There’s no question about it—healthcare is getting more and more expensive, and if you’re currently enrolled in a traditional health plan, you’re losing out on premium dollars that could be better invested and spent elsewhere. Don’t let the higher deductible associated with an HDHP scare you off, because more often than not, you come out ahead using an HDHP and an HSA versus a traditional health insurance plan.

From a cost perspective, you start saving money immediately. You save upfront on premium costs when you opt for an HSA-eligible HDHP and open an HSA versus having a traditional HMO/PPO insurance plan. Simply put, an HDHP with an HSA is much more affordable than a traditional insurance plan, and saves you real money every pay period. That recurring savings can add up quickly, and is tax-advantaged in more ways than one if you contribute it to your HSA—more on that in a bit. Plus, if you have an employer who contributes to your HSA, you get that added financial benefit that you wouldn’t otherwise receive with traditional health insurance and no HSA.

By leveraging an HDHP with an HSA, you’re able to keep saving money tax-free and adding to your HSA savings while taking a more active role in controlling your healthcare costs—all things you can’t do with a traditional health plan. And by managing your HSA effectively, you can set yourself up with savings to use for current and future medical expenses without worrying about added financial strain—all with an eye on your long-term financial health.

Even in uncertain times, an HSA empowers you to save money, take control of your healthcare costs and boost your bottom line.

Don’t Wait Until Next Open Enrollment – HSAs Offer Many Immediate Benefits and are a Great Choice for Just About Anyone

We’re living in unprecedented times, and this recent IRS notice allowing midyear health plan changes also represents a rare opportunity. It’s your chance to seriously reevaluate your healthcare coverage and consider a better option right now. You can make the switch midstream and begin taking immediate advantage of all an HDHP with an HSA offers—you don’t have to wait until your next open enrollment period or a qualifying life event.

We’ve already touched on how switching to an HDHP and opening an HSA can lower your premium costs while giving you more control over your healthcare and helping you build better short and long-term financial health. Now, let’s look at just some of the many other benefits using an HSA offers to any accountholder—benefits you can begin taking advantage of immediately after switching:

  • “Triple tax savings”–Your HSA contributions are 100% tax deductible, your HSA funds can be used tax-free for any qualified medical expenses and those funds grow tax-free from day one.
  • Portability-Your HSA and the funds within it stay with you no matter what, regardless of job changes or health insurance changes.
  • Infinite rollovers–You’ll never be faced with a “use it or lose it” scenario with your HSA—your funds roll over year after year or after a job or insurance plan change with no penalties.
  • Flexibility of use–You might be surprised at all the “qualified medical expenses” you can pay for using your HSA funds—everything from walk-in visits and surgical costs, to dental expenses, mental health services, vision care, prescription drugs and much more. And with the CARES Act, you can now even use your HSA to purchase over-the-counter medication and supplies.
  • Ever-expanding preventive care list for HSA participants–If you’re still hesitant on making the switch based on the higher deductible associated with an HDHP, remember this—you can bypass your deductible and receive immediate benefits for any care that falls under the IRS’s constantly evolving preventive care list. This saves you money both short and long-term, especially since the list is always growing and now includes care for many common chronic conditions.
  • Multiple contributors–HSA contributions don’t have to come just from you. Your employer can contribute, as well as a family member or just about anyone else. It’s a great advantage to be able to fund contributions from multiple sources, especially in trying times like these.
  • Long-term investment opportunities–An industry-leading HSA like Bend HSA provides you with the ability to easily invest your HSA contributions just like a 401(k), helping you grown your tax-free funds for the future. Even if investing isn’t top of mind while dealing with the COVID-19 fallout, it’s still a great option to have when the time is right.

If you’re still not convinced and want to learn more about why HSAs are a great choice right now no matter who you are, take a few minutes to read our blog dedicated to why HSAs work for everyone.

Bend is Here to Help You Make the Switch—and Make the Most of Your HSA

Whether or not your employer has already partnered with Bend, you have a choice when it comes to who you partner with for your health savings account. With Bend HSA, we’re here to help you make the most of your HSA—no matter who you are, what your circumstance or when you decide to opt for an HDHP with an HSA. We’re here for you no matter what, offering a simple-to-use, secure HSA with a superior user experience and unmatched customer service and support.

Connect with us today and let’s build your best HSA together.

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