According to the Bureau of Labor Statistics, healthcare costs have inflated at a rate of 8.6% annually since 1990. For reference, over the same time span, the Consumer Price Index (CPI) in the United States has averaged 2.4% annually. The CPI is the standard index for measuring inflation in the United States.

Medicare can only cover so much of this burden for retired Americans. Often, people are forced to buy additional insurance or delay retirement to help pay for health care costs. Employees delaying retirement can have a dramatic effect on benefit costs for employers. Older employees often stay working to continue on the company’s health care plan to avoid paying large medical bills out of pocket.

Couple rapidly rising health care costs with increases in life expectancy and it is no wonder why health care policy is a major problem today.

“Health Savings Accounts (HSAs) were created in 2003 so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses. Generally, an adult who is covered by a high-deductible health plan (and has no other first-dollar coverage) may establish an HSA”.

Source (US Department Of The Treasury)

Since its creation, HSA accounts have proven to be the most tax-efficient way to save for healthcare expenditures.  Additionally, setting up your account with an institution like HSA Bank allows you to invest your account and take advantage of tax-free growth.

Why should I open an account?

HSA accounts are the only IRS savings vehicle that is triple tax-free. You can deduct the amount you contribute, your savings grow tax-free, and if spent on qualified medical expenses, the distributions are also tax-free. For comparison, below is an example of how it works vs. other account types.

Important Rules

  • Employees must be covered under a High-Deductible Health Plan
  • 2017 contribution limit of $3,400 for self-only and $6,750 for families
  • Catch up contributions of an additional $1,000 for those over 55
  • Can use account to cover any copays, prescriptions or other qualified medical expenses outlined by the IRS
  • Do not have to use in the current year
  • Can transfer if you switch employers
  • No income tax constraints or required minimum distributions

After opening an account, you can also use an HSA debit card to pay providers directly out of your account.

We highly recommend companies that offer high deductible health care plans to explore the use of HSA accounts. Additionally, investing a portion of the account in low-cost mutual funds allow funds to grow over time to cover future costs, tax-free.

We are here to help you learn more.