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HSAs and the U.S. healthcare system

HSAs-and-the-US-healthcare-systemIn November 2018, Gallup released the results of a poll showing 79 percent of people were dissatisfied with the total  cost of healthcare in the United States. 

That same poll asked respondents to describe the U.S. healthcare system. 55 percent said the system had major problems, 27 percent said it had minor problems, and 15 percent said the U.S. healthcare system is in a crisis.

Finding a solution to the challenges facing the healthcare industry has been problematic, with the major political parties unable to agree on any bipartisan solution — except one. Members of both parties believe health savings accounts (HSAs) are a great way for Americans to save for medical expenses. What benefits do HSAs offer that would make politicians from both sides of the aisle support the program? Let’s take a look:

HSAs are a way to save tax-free money for qualified medical expenses1

HSAs help accountholders prepare for healthcare expenses, so they don’t need to spend other funds or go into debt to pay medical bills. Depending on how long the HSA is open, accountholders can save hundreds (or even thousands) of dollars on taxes.

HSA-qualified health plans typically cost less than traditional health plans

Accountholders usually save money on their health insurance premiums each month if they have an HSA-qualified high-deductible health plan.

HSAs offer a triple tax advantage1

Any funds an accountholder contributes to their HSA are not taxed. Accountholders can potentially grow the funds in their HSA through interest and investing2 and any increase in the funds is not taxed. And accountholders can spend their HSA funds on qualified medical expenses tax free.

HSA balances roll over every year

Unlike other medical savings accounts, an HSA balance carries over year after year, making them a strong component of more and more people’s retirement plans.

HSAs encourage a consumer-driven healthcare mindset

An HSA paired with a consumer-driven healthcare mindset can help accountholders take control over their healthcare decisions. For example, an HSA accountholder may choose a generic prescription over the name-brand version in order to save money. 

Save now, cash in later

Accountholders can pay for qualified medical expenses out-of-pocket and reimburse themselves from their HSA later. In fact, there is no expiration date for reimbursement, so accountholders can reimburse themselves even years after the initial expense as long as they keep receipts documenting their payment.

Saving for retirement

A recent analysis by Employee Benefit Research Institute estimated the average American couple, with median prescription drug expenses, will need $301,000 to have a 90 percent chance of covering out-of-pocket healthcare costs in retirement. An HSA paired with a 401(k) or similar retirement vehicle can be a great way to prepare for the expenses of retirement.

 

Conclusion

HSAs provide a great opportunity for people to save money on taxes and financially prepare for the future. In fact, the benefits HSAs provide have already led to bipartisan support of HSAs as part of a solution to help fix the U.S. healthcare system.


1.  HSAs are never taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states recognize HSA funds as tax-free with very few exceptions. Please consult a tax advisor regarding your state’s specific rules.

2. Investments are subject to risk, including the possible loss of the principal invested, and are not FDIC or NCUA insured, or guaranteed by HealthEquity, Inc. Investing through the HealthEquity investment platform is subject to the terms and conditions of the Health Savings Account Custodial Agreement and any applicable investment supplement. Investing may not be suitable for everyone and before making any investments, review the fund’s prospectus.

 

HealthEquity does not provide legal, tax, financial or medical advice. 

 

Topics: HSA, retirement, 401(k), FSA questions, HSA benefits, CDHP, qualified medical expenses

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