Why Americans can't afford NOT to have an HSA

To those who don't quite understand how HSA-qualified plans work, a high deductible seems daunting. Many may say that they can't afford the high-deductible and so they select a traditional plan and pay the significantly higher premiums typically associated with it.

Because HSA-qualified health plans have higher deductibles, the burden of upfront medical costs is more immediately apparent to those who have this type of coverage.  The plans usually have smaller monthly premiums, but the trade-off is more out-of-pocket expenses before insurance kicks in. While at first, this may be perceived as a negative, knowing you're on the hook for more of your medical bills may actually push you to find smarter ways to put your HSA dollars to work and save.

Getting the most from a HSA-qualified plan

With a high-deductible plan, users are more involved in decisions about healthcare, and there's a lot they can do to make the plan work better for them. Shopping around for less costly procedures and providers, and not visiting the doctor or emergency room for things like a common cold can go a long way. Here are some additional suggestions for saving on healthcare:

Take advantage of covered services

Many preventative and routine health services are covered 100% by insurance. They are intended to support a healthy lifestyle or catch problems early, and include things such as mammograms, colonoscopies, and vaccinations. According to a 2016 study published by Guardian Life Insurance

however, only 2 in 5 people with HSA-qualified plans said they were "doing a good job keeping up with checkups and preventive doctor's appointments." And, 14% "delayed surgery or a recommended procedure" due to cost. HSA users can speak to their doctor or insurance carrier about what services are considered preventative and recommended.

Compare prices

With a higher deductible, it is vital to shop around for healthcare services to save on services. Many health insurance carriers provide information on where to find in-network services. Some may offer cost-estimation tools compare pricing at different providers for specific services. Spending the time to research costs can be worth it. Prices for medical treatments can vary considerably from provider to provider, even within the same city.

In Chicago., for example, the average price for anterior cruciate ligament knee (ACL) surgery is $16,632, but it ranges from $4,669 to $61,601, according to Healthcare Bluebook‚Ñ¢ (healthcarebluebook.com).

Prescription medications are another item that can vary dramatically in price from one place to another. Applications like Lowest Med help consumers find the least expensive options for filling their prescriptions.

Consult with a doctor

Doctors can be very helpful when trying to balance cost with quality of care. By consulting with a doctor about financial healthcare goals she or he can do things like prescribe generic prescriptions, or help in finding less expensive, but equivalent, tests and procedures.

Taking advantage of tax breaks

An HSA helps ease the pain of higher out-of-pocket costs by allowing accountholders to set aside money on a tax-free basis to save for qualified medical expenses. HSAs are triple tax advantaged: Contributions can be made with pre-tax money (through payroll deduction, when available). Contributions can also be made directly and claimed as a tax deduction. When used for qualified medical expenses, withdrawals from an HSA are tax free. Finally, HSA balances can earn interest or be invested, and the earnings are not subject to tax. That's tax-free money-up to $3,450 annually for individuals and $6,900 for families (in 2018)-that can be used to pay for qualified medical expenses. And if HSA funds aren't used within a given year, they roll over and can grow tax-free, year after year.

HSAs are portable, meaning the funds remain with accountholders if they change jobs or retire. To encourage the use of HSAs, many employers contribute to their employees' HSAs. Some will even deposit additional money (tax-free of course) into HSAs as part of wellness incentive programs.

Keeping perspective

HSA-qualified insurance can appear to be expensive on the surface, but if all facets are considered, an HSA can be a beneficial cost-saving and retirement strategy. The Affordable Care Act mandates that almost all insurance plans cap out-of-pocket costs (not including premiums or out-of-network care). Once the max is reached, an insurer must pay 100% of in-network costs. Often times the tax savings and reduced premium costs of an HSA paired with an HSA-qualified plan can more than make up for the upfront costs associated with a higher deductible. To learn more about HSAs, visit HealthEquity.com/HSAlearn.

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 available to HSA holders are subject to risk, including the possible loss of the principal invested and are not FDIC insured or guaranteed by HealthEquity, Inc.

3. It is the member's responsibility to ensure eligibility requirements as well as if they are eligible for the plan and expenses submitted. One should consult a tax advisor as individual factors and situations vary.

Nothing in this communication is intended as legal, tax, financial, or medical advice. Always consult a professional when making life-changing decisions.