Why should you get a health savings account (HSA) when you are young and healthy? Simple…to save yourself money and to invest in your future.
When you live paycheck to paycheck, it's hard to give up any money for something that you don't know enough to do it. I tried a small amount the first year and added more the following year. Here are some reasons why I did it:
Tax Savings
Your biggest savings is it’s pretax. HSA lowers your Gross income so fewer taxes come out each paycheck and at the end of the year. When you don't have a lot of medical bills, you don't have enough to itemize at the end of the tax year. So, it is better to take advantage of the tax break each payday. The IRS has a limit set on the contribution amount.
Investment Opportunities
Another tax savings advantage is investing the money in the HSA. Unlike a Flex Spending Account (FSA), an HSA account allows you to continue to accumulate the money year after year. With this accumulation, you can opt to invest some of it. Online I can set up how much I want to go into the investment area. I have mine set that anything over $1000 goes into investment. In the investment area, it is like the 401k where I can choose how to invest the money. All money made is tax-free if it is used for your health.
It was great to be able to continually modify how much I wanted in the investment portion of my HSA. You have the option of moving from account to investment whenever you choose. You can modify how much you want in the regular HSA and the rest go into investment. If you want to stop investing and move it back over to HSA account part, then it takes a couple days but it will go over. Since it works like the 401k, you can continually change how you want your investments and can see how it does as well.
Employer Contribution
With a high deductible plan, people can get an HSA account. Some employers will contribute to your HSA account. This is FREE money. Like your contribution, it gets split up and distributed over the year. That money is not taxed unless you withdraw your HSA and use it for something other than Medical.
Flexibility
Most benefits from the employer can only be adjusted during enrollment or for life change. I was able to lower the amount I originally selected one time and I was able to add more another. When I found I was going to have more medical bills when I got cancer, I asked if I was able to add more money to the account. Why? Because I was going to be paying those bills anyway. If I can get it pretax, then it will save me money. A day or two after my payday, my contribution was in the account and I was able to use it. Check with your benefits advisor to see if you are able to do it at your company.
Not Managed by Employer
What was great is that the HSA is run by an outside company. So, once you leave that employer, it still goes everywhere with you. When I quit one job and went to another, I was able to continue using it.
Helps If You Lose Your Job
None of us ever plan to lose our jobs. Even those who are the single point of failure for a company can find themselves replaced by reorganization, budget cuts, and so many other reasons. HSA allows user to use it to also pay health insurance premium when you get unemployed or want to use it for COBRA to continue your existing premiums. You would have to talk to your HSA company to see how this works. I have not had to use it for that purpose yet. When I was laid off due to company re-organization and projects a few times, I didn’t sign up for cobra, I just paid the doctor with money in the account.
The Large List of Items That It Can Be Used On:
I went online to look at the list of items that this account can be used. Some items require a doctor’s script. For example, I have Vitamins I take because I have deficiencies like iron, vitamin D, and B12. I also get tension headaches and lower back issues from sitting down typing all day with my job. So, I have a script from the doctor for massages. I never had a massage until she recommended it. I was amazed at how much it helps. My kids have contacts. So, we used it for not only the contacts but the solution too.
Another way to know what is covered is that some places like drug stores, have a letter at the end of each line item that lets you know if it is covered. It might be as simple as “F”. Look at your receipt and ask the retailer if it doesn’t have a note at the bottom explaining.
When I am taxed at the store for these purchases, it's good when your money going into this account is pre-taxed. At least you are not being double-taxed for items you use. If after I pay for it with my regular money, I can submit the receipt and get reimbursed for the ones that have the code.
Credit Card to Pay
I like the flexibility of the credit card they issue. It is so much easier. I just go to the retailer or doctors and they all accept the credit card. Since these are taken out pre-tax, always keep receipts of medical. At the beginning of the year, I start a file folder and just throw them in there as I accumulate them. I may never need them, but I keep them in case the IRS wants to see them. They may require proof of what you spent with the money.
Allowed to Get Reimbursed from The Account Later
With the HSA, if I had a $600 bill but hadn’t accumulated enough to pay the bill yet, I could pay the bill and get reimbursed when the money got there. I just had to set up my checking account information or mailing address. When I had the HSA sent to my checking account, it only took a couple of days to get in there. Mailing takes longer.
I can also have it pay the medical professionals directly. I had a payment plan arranged with them and put that information for the doctor. As the money came in, they mailed out the payment. This came in handy when I didn’t want a medical bill to go to collections.
One way I save additional money is I call the billing company and ask if there is a discount for paying upfront or without a credit card. Some places do. I have saved anywhere from 5-20% from paying with a check or paying the bill in full within the first month. I then go online and reimburse myself. It takes a little time, but it is worth the savings. When I didn’t have it ahead of time, I would get the discounted amount from them and let them know I would be mailing it. Then I set it up for the HSA to mail them the check from the account. I just ask them to mail me the receipt for my tax file.
Save Money
1. Opt for High Deductible plan.
When you are young and healthy, most people will save money by opting for the high deductible health plans through their employers, take advantage of a company’s contributions to HSA and IRS pretax benefit on HSA. This is free money. High Deductible Health Plans take less money out of your paycheck each month. The money you save each month is put into the HSA. Just in case you need it later.
Most are afraid of a High deductible plan because they are paying money before they meet their 80/20 discount. If you go in-network (to a doctor on the insurance companies plan), then you still will save money because insurance has worked out arrangements with doctors for a discounted rate. If you look at your Explanation of Benefits (EOB) from the insurance company, you will see the money you save despite not meeting your deductible. The money you are putting into the HSA will help offset the amount paid by the doctor.
2. Get an online account for health insurance companies.
Look at your Explanation of Benefits (EOB). I strongly encourage people to get an account with their insurance companies. I check my EOB’s regularly to see my savings but also to see if the doctor’s office didn’t charge correctly or the insurance company denied it for some reason. My goal is to save money. If someone has made a mistake and I don’t catch it, it can cost me!
One insurance company I was on had different healthy activities in a rewards program that gave me money in the end. It was great. It motivated me to stay healthy to get some of my money back.
Some insurance companies have discounts for sports equipment, gyms, exercise clothes, and more. These are great ways to save money on stuff you already planned to do or buy.
3. Opt to use benefits the insurance company provides
Another way to save money with health insurance is to take advantage of Some insurance companies have a telehealth option to speak to a doctor. These usually cost about $40-60. Contact your insurance company for an exact price.
Some insurance companies like Anthem Blue Cross/Blue Shield have on-call nurses, nurses who will talk with you regularly about managing your chronic illnesses, staff nutritionists, second opinion options, and a department that will give you the lowest price location for some of your treatments. When I had to have bloodwork done, they gave me the cheapest place to get it taken care of in my area. My doctor gave me an order for that location. Likewise, when I had to get a CT scan done, they gave me the location of the cheapest place. It was about a half-hour away. However, it was over half the cost. Most people are unaware of the cost-saving opportunities and the other benefits the insurance company wants to keep people healthy. To learn more, contact your insurance company and ask about these and other benefits.
Here is an example of how all of this would work...
Each month you save $150 by choosing the high deductible plan. You put that into the HSA account. In July your HSA accumulated $1050. You caught a summer cold. You call the telehealth doctor on your computer. This costs you $50. He sends in a prescription for cough medicine and steroids for $150. Then right now the HSA allows for over-the-counter medicines, so you add some Musenix and Benedryl for another $30. At the end of the cold, you still have $820 in your HSA.
Invest in Your Future
There are some things you can guarantee in life… one of which is that you or your family will get sick. If you live paycheck to paycheck as I did for so so many years, you still want to add to the HSA. I was surprised at how little difference in my paycheck it made when I did $500 a year. There are times we know how much some of our medicines will be, the dentist gave us an estimate of cost for cavities, eyeglasses…etc. So, I know that there will be some expenses the following year. I go ahead and make sure those expenses are already planned out so I can take advantage of the pretax option.
As I was getting older, I opted for the maximum out each year. I was glad I did. I only had a few cheap medical issues like thyroids. Then last year when I was diagnosed with cancer, I had money in my account. NO ONE plans to have cancer, not the child, the healthy twenty-year-old, or the older adult. However, I was blessed because I had money in my account. In a six months timeframe, I had already spent over $12,000. Now my HSA is being used to save my life.