More employers are implementing HSA options into their employee benefits.  It’s not just that the health plans are less expensive, but also to move to consumer based health plans.  What are Consumer Based Health Plans?  Consider this, if you walked through your local Sears to purchase a refrigerator, would you expect that the plain white one will cost the same as the larger stainless steel models?  Of course not!  Then why is it that a family physician that graduated from an Ivy League Medical School is the same $30 Copay as a family physician that received its degree from a small island that we can’t seem to locate? 

We do not tend to generalize the quality of medicine that physicians can provide is based purely on the school that they attended.  But just like brand preference, some may want to ‘shop’ their medicine based on the school.  Others may want to shop based on the quality of healthcare provided.  While others may want to shop based on the price that is actually charged.  HSA Qualified Health Plans are providing a movement towards this type of transparency in the medical care market.

Basics of Health Savings Accounts

A health savings account (HSA) is a tax-favored savings account.  Easiest way to understand how they work is that the IRS views them pretty much the same as any other retirement account.  Even if an employer provides the HSA option, these accounts are owned by the participant and held under your individual social security number.  Only you will know the balance of the funds and your employer cannot see what expenses are paid from your HSA account. 

Since HSA accounts have tax advantages, there is an annual contribution limit that tends to increase each year.  The 2018 HSA maximum contribution limits that an individual can deposit is $3,450 and for family plans the max is $6,900.  Unused funds continue to rollover year over year and any interest income received on the balance of the funds saved will also grow tax-deferred.  Upon retirement, funds can be accessed at no penalty similar to other retirement accounts.

Unlike other retirement accounts, you can use the funds in your health savings account on eligible medical, dental, and vision expenses and no penalty will be assessed for accessing your funds pre-retirement eligibility.  We have listed some of the eligible expenses below.

Health Care Plans - HSA Eligible

If a health savings account seems right for you and your family, the next step is to be sure that you have a health insurance plan that is eligible to attach an HSA to.  Your employer sponsored health plan will most likely already let you know which plan is eligible.  These are certain health plans marketed by health insurance carriers that are High Deductible Health Plans (HDHP) and have a minimum deductible for self-only plans of $1,350 in 2018 or for families of $2,700.  However, most HDHPs will be marketed with higher deductibles so the insurance carriers can market plans with lower monthly premiums.  The HDHP maximum out-of-pocket limits for 2018 for self-only plans are $6,650 and for family plans are $13,300. 

HSA Bank Options

Most major banks have an HSA option available with small monthly fees.  The IRS allows you to make a one-time rollover from a current retirement account, like an IRA, to help jump start your HSA with a balance.  It’s a good idea to deposit funds into the new account early for two reasons.  First, so you can use the pre-tax funds on eligible medical expenses.  And second, so you can eliminate any possible banking fees that might be associated with your new account.  Most banks will have a monthly fee of $3.00 to $5.00 until your account balance reaches around $1,000 to $3,000.  Once you reach their minimum balance the monthly banking fees will stop. 

If you are new to saving for retirement, we feel a good strategy is to max out your annual contributions to your health savings account.  Personally, I maxed my contributions to my HSA before I got really aggressive with my 401k contributions.  The rationale behind this, was that an HSA (as a retirement account) can be more liquid than a 401k… where I can use those funds without penalty for any eligible medical expense, right now.  Whereas, if I were to take a loan from my 401k, I could be faced with early withdrawal penalties and income tax.

I currently use HealthEquity as my HSA bank and have had an active account with them for 8 of the past 10 years.  Their online portal is easy to use.  For retirement options, they have many mutual funds to choose from once you maintain an account balance of $2,000 or more.  If you do not feel comfortable choosing those funds, you can speak with one of their advisers as well as choose a money market account that is less risky and provides a higher interest yield than the standard savings account. 

Another well known HSA provider that I have worked with in the past is Optum Bank which is an affiliate of UnitedHealthcare.  Choosing a bank that is FDIC insured is important as well as one that provides many no-load funds to be able to invest towards building a retirement account. 

Eligible HSA Expenses

• Acupuncture
• Alcoholism
• Ambulance
• Annual Physical Examination
• Artificial Limb
• Artificial Teeth
• Autoette
• Bandages
• Birth Control Pills
• Body Scan
• Braille Books and Magazines
• Breast Pumps and Supplies
• Breast Reconstruction Surgery
• Capital Expenses
• Car
• Chiropractor
• Christian Science Practitioner
• Contact Lenses
• Crutches
• Dental Treatment
• Diagnostic Devices
• Disabled Dependent Care Expenses
• Drug Addiction
• Drugs
• Eye Exam
• Eyeglasses
• Eye Surgery
• Fertility Enhancement
• Founder’s Fee
• Guide Dog or Other Service Animal

• Health Institute
• Health Maintenance Organization (HMO)
• Hearing Aids
• Home Care
• Home Improvements
• Hospital Services
• Insurance Premiums
• Intellectually and Developmentally Disabled, Special Home for
• Laboratory Fees
• Lactation Expenses
• Lead-Based Paint Removal
• Learning Disability
• Legal Fees
• Lifetime Care—Advance Payments
• Lodging
• Long-Term Care
• Meals
• Medical Conferences
• Medical Information Plan
• Medicines
• Nursing Home
• Nursing Services
• Operations

• Optometrist
• Organ Donors
• Osteopath
• Oxygen
• Physical Examination
• Pregnancy Test Kit
• Prosthesis
• Psychiatric Care
• Psychoanalysis
• Psychologist
• Special Education
• Sterilization
• Stop-Smoking Programs
• Surgery
• Telephone
• Television
• Therapy
• Transplants
• Transportation
• Trips
• Tuition
• Vasectomy
• Vision Correction Surgery
• Weight-Loss Program
• Wheelchair
• Wig
• X-ray