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Why Choose an HDHP and HSA?

Oct 7, 2020 8:00:00 AM

When it comes to your healthcare insurance coverage, you can’t afford to just “set it and forget it.” That approach can end up leaving you with a plan that isn’t the best fit—not to mention one that costs you substantially more than a better option.

With open enrollment already underway or right around the corner for many, now is the time to evaluate your options, and to seriously consider choosing a health savings account (HSA) eligible high-deductible health plan (HDHP) for 2021 and beyond.

Don’t let the term “high-deductible health plan” scare you. Enrolling in an HDHP and utilizing an HSA can actually help you keep more of your hard-earned money and lower your overall healthcare costs, among other benefits.

Now more than ever, you need to make your money work smarter for you. So let’s look at why now might just be the perfect time to make the switch to an HDHP with an HSA.

4 Reasons You Need an HDHP and HSA in 2021 and Beyond

The ongoing pandemic has brought to the forefront the need for affordable healthcare solutions—pairing an HDHP with an HSA answers that call. The HDHP + HSA combination works for everyone, regardless of age, income level or health circumstance.

Still not sold? Consider these four reasons you need an HDHP and HSA now and into the future:

  1. You’ll save money on insurance premiums-HDHPs offer considerable premium savings compared to traditional insurance plans. That savings adds up quickly, and can even be contributed to your HSA tax-free for even more savings. More often than not, you come out ahead with an HDHP and HSA versus a traditional insurance plan once you factor in premium savings and the tax benefits.
  2. You’ll save money on taxes in multiple ways-With an HSA, you get a “triple tax advantage.” Your contributions aren’t taxed, your funds grow tax-free and all your withdrawals for qualified expenses are tax-free.
  3. You’ll get the flexibility and portability you need now more than ever-While your HDHP coverage is tied to your employer or plan choice, you solely own your HSA. That means it’s yours to keep and use no matter what—even with a job change, insurance plan change, retirement or otherwise. There’s no “use it or lose it” with an HSA. Your funds roll over indefinitely and can be used for a variety of healthcare costs—including nonprescription medications, menstrual care products and other expenses you might think wouldn’t be eligible. You receive immediate benefits for anything listed on the IRS’s ever-expanding preventive care list (like coverage for asthma, diabetes, heart disease and more). And HSAs even allow for multiple contributors—if your employer contributes to your HSA, that’s just another perk to add to your bottom line.
  4. You’ll be able to invest your funds tax-free to boost your long-term financial wellness-With an industry-leading HSA provider like Bend, you can take advantage of the unique ability to invest your HSA balance in mutual funds similar to a 401(k), setting yourself up for a bright financial future and saving more for retirement. Best of all, your investment earnings are also tax-free, and should you decide to use your HSA contributions and earnings for other purposes after retirement, you can do so without penalty after you turn 65.

Be Ready for Open Enrollment

If you’re still hesitant to make the switch to an HDHP with an HSA for 2021, simply take a little time to compare your options side by side this open enrollment season. Evaluating your HDHP/HSA options against your traditional plan options is critical, but doesn’t have to be overly complex or time consuming.

Follow these three tips to compare your options like a pro and be confident you’re making the best and most cost-effective decision.

  1. Revisit your healthcare spending-Look back at your expenses over the past year to give you a general guide as to what your average annual expenses look like. Be sure to factor in your premium payments, as well as any planned expenses you have for the coming year, like having a baby, a joint replacement or other scheduled procedure. And take advantage of an online comparison tool to help you through this process if one’s available to you through your employer or other resource.
  2. Review your health plan option details-Once you have an idea of what your healthcare spending looks like, dig into your health plan option details. Look for what’s changed and what’s new, and focus on four key elements to make your comparison and get a clearer picture of each option’s true costs:
    1. Premiums-While traditional plans have lower deductibles, they have significantly higher premiums. Compare the monthly premium difference between HDHPs and traditional plans at your coverage level (individual or family) and multiply by 12. Oftentimes, you’ll find you can take your premium savings, contribute it to an HSA paired with your HDHP, and come out ahead.
    2. Deductibles-Traditional plans typically have lower deductibles than HSA-eligible HDHPs, but more often than not, their higher premiums offset any deductible savings. Beware that a traditional plan with a lower deductible can actually end up costing you substantially more than an HDHP.
    3. Copayments-This is the percentage of costs paid after reaching your deductible. Typically, you pay 20% and your insurer pays 80% until you reach your out-of-pocket limit for the year. Note that some HDHPs begin paying immediately at 100%. Also be aware that just because a traditional plan may offer copayments quicker, it doesn’t necessarily mean you’re paying less overall than if you had HDHP coverage.
    4. Out-of-pocket limits-This is the maximum amount you could pay in a year for covered services—including your deductible and copayments. Once you’ve hit your limit, coverage is paid at 100%. Look at this number as the potential most you could pay in any given year for your healthcare expenses, regardless of plan choice.
  3. Consider the bigger picture—especially when it comes to tax benefits and other advantages-The final step to make your comparison between HSA-eligible HDHPs and traditional plans concerns taking a look at the bigger picture. Like we mentioned earlier, leveraging an HSA with an HDHP offers a unique “triple tax advantage” not available if you choose a traditional plan, as well as other benefits like flexibility, portability, potential employer contributions and tax-free investment opportunities. It pays to look beyond the plan details themselves to see how an HSA-eligible HDHP can help you take a more active role in your healthcare and achieve a brighter financial future.

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

We get it—change is hard—especially if you’re used to the structure of traditional health insurance plans. But don’t let that make you miss out on all the advantages of choosing an HDHP + HSA for 2021.

And if you need to choose your own HSA provider once you’ve enrolled in an HSA-eligible HDHP, look no further than Bend. With a Bend HSA, you don’t have to be an HSA expert to make the most of your account. We’re here to help you every step of the way and provide you with the resources, tools and education you need.

No matter who you are or what your goals, we’re here to help you make the most of your health savings account.

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