As this post is being written, companies of all sizes are preparing for open enrollment. Company owners have worked with their brokers to come up with what they feel is the most appropriate package for 2023. As a company owner yourself, are health savings accounts (HSAs) part of your 2023 plan?
Estimates suggest that the total value of HSAs in 2022 will exceed $100 billion when all is said and done. Even so, only one-third of U.S. workers eligible to utilize an HSA actually do so. That amounts to leaving money on the table when it could be protected from taxation by putting it into a healthcare account.
More About HSAs
An HSA is a specialized financial account through which employees put away money they intend to use to cover qualified healthcare expenses. All HSA contributions are tax-free. They are funded through payroll deduction before taxes are applied. Moreover, employees do not pay taxes on the money when it is spent according to established HSA rules.
Of course, there are contribution limits. Maximum contributions for singles with individual coverage stood at $3,650 for 2022. Contributions for employees with family health insurance plans were capped at $7,300. Again, this is all tax-free money.
Funds contributed to an HSA can be used to cover doctor visits, hospitalization costs, prescription medications, medical devices, etc. Virtually any legitimate healthcare expense can be paid for with funds from an HSA. And if all the funds are not used in a given year, they can be rolled into the next year.
Qualifying Relatives Are Included
Another huge benefit of the HSA is that employees can use their funds to cover healthcare expenses incurred by qualifying relatives. The government’s list of qualifying relatives includes:
- spouses and domestic partners
- dependent children, stepchildren, foster children, and grandchildren
- dependent siblings (including half siblings)
- dependent parents, grandparents, aunts and uncles
- dependent in-laws of all types
- any other dependent who resides full-time in the employee’s household.
The HDHP Requirement
As fantastic as HSAs are, they are not available to everyone. HSAs do come with restrictions. Right off the bat, only employees with high deductible health plans (HDHPs) are eligible. For the 2022 plan year, an HDHP has a minimum deductible of $1,400 for an individual employee or $2,800 for a family plan.
By definition, HDHPs have higher deductibles than standard health insurance plans. Certain preventative services are covered entirely. But beyond those services, employees pay more out-of-pocket before their health plans kick in.
The point of the HSA is to give them a vehicle for covering those expenses using tax-free money. That way, all the money goes toward healthcare expenses rather than just the portion that isn’t taken by the tax man.
Employers Should Consider HSAs
BenefitMall, a Dallas general agency that specializes in broker services, says employers with HDHPs should at least consider giving their workers access to HSAs. Health savings accounts can be set up relatively easily and don’t add substantially to a company’s bottom line.
By the same token, HSAs can be presented to employees as a voluntary benefit that save money on healthcare expenses. With healthcare prices continually going up, any means of saving money tends to be welcomed by cash-strapped employees.
If it is true that two-thirds of eligible employees are not taking advantage of the HSA, we need to change that. HSAs are fantastic tools to help people with HDHPs save money on healthcare expenses. By providing tax-free accounts into which they can put dedicated funds, employees with HSAs can get the healthcare services they need while stretching every dollar further.