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Whether this is your first experience with a health savings account, or whether you’ve had an HSA for a while but haven’t done anything with it yet—there’s no better time than now to figure out the next steps of what you need to do to move forward and make the most of your health savings account.
So, what should you do next if you have an HSA? How do you make the most out of pairing this special, tax-advantaged account with your HDHP?
Having an HSA doesn’t have to be scary, overwhelming or overly technical. In fact, it’s quite the opposite. Your HSA can be a powerful tool to help you save on taxes and gain control over your healthcare costs. You simply need to start by understanding some HSA basics.
First thing’s first—you need to understand what an HSA is, how it works and what it offers you as a healthcare consumer.
HSA is short for health savings account, and the main purpose of your HSA is to serve as a tax-advantaged savings account that works in tandem with your HDHP to save money to pay for qualified medical expenses until you reach your HDHP’s deductible. Your HSA functions as a bridge between the higher deductible and the point at which your HDHP begins paying for covered expenses. HSAs can be funded by a number of sources—you, your employer or even a family member or friend. The idea is to contribute enough money into your HSA to be able to cover any medical expenses you have (expected or unexpected) up to your annual deductible. Oftentimes, the premium savings you benefit from can be your contribution. And if you have an employer-sponsored HSA program, employer HSA contributions can help grow your HSA savings as well. Even if your employer doesn’t contribute, or if you’re self-employed or in a different circumstance, contributing to your HSA is still step one and a smart and savvy move. Anyone who has an HSA-eligible HDHP can benefit greatly from actively using their HSA.
Once you’ve met your annual deductible, your HDHP begins performing like traditional insurance. For example, after your deductible is met, you may receive 80% coverage on medical costs until you meet your annual out-of-pocket maximum. Many HDHPs offer 100% coverage after you meet your deductible. When you’re covered at 100%, you don’t need to use your HSA—but it’s still critical to contribute to ensure that your HSA is adequately funded for the next time you need it. And don’t forget—there’s a growing list of medical services, products and prescriptions that fall under preventive care, where coverage is provided immediately without the need to meet your deductible.
Bottom line—knowing your HSA basics and pairing an HSA with your HDHP is an extremely powerful combination that provides you with greater flexibility and control over your healthcare spending, along with substantial tax advantages and other benefits.
If you still have general questions on any HSA basics, visit our HSA Basics resource, which covers just about everything you need to know regarding HSA FAQs in easy-to-read segments, question by question. For questions regarding your specific HSA, be sure to consult your HSA provider.
With a solid understanding of HSA basics comes the knowledge of all the ways an HSA benefits you. From tax advantages and investment opportunities, to flexibility and convenience, HSAs provide many upsides. Let’s take a look at some HSA advantage highlights.
HSA HIGHLIGHT #1: HSAs provide triple tax savings – You save on taxes in three ways with an HSA:
1. Your HSA contributions are 100% tax deductible, up to the annual legal limit (much like an IRA). If you contribute pretax, your contributions aren’t included in your gross income and aren’t subject to income taxes. If you contribute after tax, you can still deduct your contributions on your tax return and lower your overall tax liability
2. Your HSA funds can be used tax-free for any qualified medical expenses
3. Any interest or other HSA growth is tax deferred
HSA HIGHLIGHT #2: HSAs offer a dedicated savings account for medical expenses – Your HSA provides you with one streamlined account to pay for all HSA-qualified medical expenses, present and future.
HSA HIGHLIGHT #3: HSAs are portable – Your HSA remains with you no matter what, regardless of job changes, health insurance plan changes or even retirement. The contributions in your HSA will always remain available to use for qualified medical expenses in the same tax-advantaged way as the day you open your HSA. And when you retire, you can even use the funds for non-medical expenses with no penalty.
HSA HIGHLIGHT #4: HSAs allow for rollovers – You won’t be faced with a “use it or lose it” scenario when it comes to your HSA contributions like you do with many other tax-advantaged accounts like FSAs. Any funds left in your HSA at the end of the year roll over indefinitely with no penalties or charges.
HSA HIGHLIGHT #5: HSAs can be used for a variety of healthcare costs – You might be surprised when you see all the “HSA-qualified medical expenses” you can pay for using your 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 your HSA. Even many over-the-counter medications can be paid for using your HSA with a prescription from your provider.
HSA HIGHLIGHT #6: HSAs allow for multiple contribution sources – HSA contributions don’t just have to come from you. Your employer can also contribute to your HSA, as well as a family member, friend 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 insurance coverage (individual versus family coverage), but it’s still a great advantage to be able to fund contributions from multiple sources.
HSA HIGHLIGHT #7: HSAs provide you with an additional investment opportunity – An industry-leading HSA account like Bend HSA provides you with the ability to invest your HSA contributions similar to a 401(k), helping you save more for retirement. And in fact, should you decide to use your HSA contributions for other purposes after retirement, only income tax at your current rate will be due.
As you can see, HSA advantages are many, and health savings accounts are a game-changer when it comes to maximizing the benefits of your HDHP. HSAs are convenient, tax-advantaged and offer many other positive benefits to help you toward a path of better financial wellness.
In order to truly maximize your HSA, you need to learn how to use your specific HSA platform. If you have a Bend HSA, you’ll enjoy using the smartest, most advanced HSA platform on the market, built with easy-to-use features and user-friendly automations. But regardless of who you have your HSA through, there are many universals you’ll need to understand.
You need to know how to contribute to your HSA. Whether through payroll deduction, online transfers, mailing physical checks or other methods, how you make contributions is a vital element of maintaining your HSA.
On the flipside, you also need to know how to pay for HSA-qualified medical expenses with your HSA, as well as what expenses are HSA-qualified expenses. That means you need to know both how and when to use your HSA debit card (if one is provided), online bill pay or any other payment options available to you whenever you have an HSA-qualified expense.
Related to HSA payments, you need to understand how to reimburse yourself for HSA-qualified expenses you paid for out of pocket. You may be able to reimburse yourself directly by using your HSA debit card at an ATM, through an online transfer or direct deposit, by requesting a physical check or through other methods.
And once you have contributions, payments and reimbursements rolling, you’ll need to be sure you’re comfortable checking your account balance and accessing your important account info. That includes everything from where you go to see your account activity, to how you update your contributions.
You’ll also want to be sure you’re playing by the rules and keeping good records of any expenses you pay for with your HSA. If you have a Bend HSA, keeping records is easy with a comprehensive “electronic shoebox” that links your accounts and tracks and manages HSA-eligible expenses, leaving no expense behind.
And lastly, regardless of your HSA platform, you’ll want to be sure that you take advantage of any and all HSA account management tools. That could mean using a convenient mobile app, opting in to important text alerts regarding your account, reading email communications, using your HSA platform’s educational resources or help sections and more.
The rise of HDHPs paired with HSAs in the American healthcare system falls in line with the modern trend toward more consumer-driven healthcare, where you can take a more active role in your healthcare and directly help control your healthcare costs.
Being proactively engaged with your HDHP and HSA takes some effort, but that effort can pay off in more ways than one. When you’re actively engaged, you can save money and make smarter decisions when it comes to your healthcare—everything from the types of office visits you choose and the prescription drugs you purchase, to the amount of money you set aside each year for your healthcare costs.
When you know the HSA basics, understand HSA advantages and learn your specific HSA platform, you’ll know and understand not only how your healthcare works, but also how the medical expenses you have impact your bottom line and overall financial well-being.
If you don’t have a Bend HSA, it’s worth your while to discover the Bend Difference. Bend provides you with the smartest, most advanced HSA on the market, loaded with innovative, user-friendly capabilities that work for you. Best of all, a Bend HSA has no monthly fees for individuals and families. No gimmicks. No surprises. No hidden fees. Just a great HSA platform designed to make unlocking the full potential of your HSA simple and convenient.