The way things have been going, I can’t be the only one who is looking forward to a New Year.
It might not feel like it, but 2021 is actually right around the corner. That means that now is the time to be making moves to reclaim, reinforce, or re-think our financial goals.
For many, generating significant wealth in the new year does not have to be complicated. Making the switch to an HSA-qualified health insurance plan can slash your monthly premiums while also providing the unique, tax-deferred investment strategy of a Health Savings Account.
Switching to an HSA-qualified plan isn’t hard to do. But there’s only one time of year that you can get it done, and that’s coming up soon. With Open Enrollment approaching, I thought we’d touch on some of the most significant benefits of an HSA plan.
The Multiple Benefits of an HSA Plan (“HSA-Qualified”)
Also known as High Deductible Health Plans (HDHPs) HSA-Qualified plans are what we call “low hanging fruit” when it comes to saving money on health care. First, they sometimes come with premiums that are far lower than “regular” plans. For folks who don’t use their health insurance much, this immediate monthly savings can go a long way.
One you have a HDHP, you also gain access to a Health Savings Account (HSA). This is a special kind of bank account designed specifically to help people who have high deductibles. HSAs allow you to contribute, grow, and withdraw your hard-earned dollars entirely tax-free.
So what’s the catch? Firstly, you can only spend HSA funds on qualified health care expenses. Otherwise, the withdrawal loses its tax-deferred status. But when you consider how much the average person spends on health expenses, the savings potential becomes clear.
Q: Why Are Employers Encouraging HSA Plans?
Across the country, more and more employers are turning to HSA plans as a way to create savings. After all, payroll, benefits, & health care are usually the largest expense for a company of any size. By offering HSA-qualified group plans, employers save on their own monthly costs.
For many businesses, increasing HSA contributions is an effective way to encourage employees to switch to a less expensive plan.
Q: What are the HSA Contribution Limits in 2021?
One of the restrictions on HSAs is that there is a limit on how much you can contribute. In 2021 the HSA contribution limits are going up slightly. The annual HSA contribution limit for an individual will be $3,600 for personal HSAs and $7,200 for family HSAs.
The Potential Downside to HSAs and High-Deductible Plans
Like any other health care strategy, there are going to be some tradeoffs. This means that HSAs and high-deductible health insurance plans are not going to be right for everybody.
For example, individuals who have a chronic medical condition might be better served by a traditional plan. In fact, if you have anticipated medical needs that are anything beyond bumps, scratches, and the occasional flu, then you might want to stick with your current plan. In addition, HSA-qualified plans are not available in all areas.
One way to decide is to have another look at your last few years of health care costs. With this number, your Benefits Manager can show you how much you could save with an HSA. Alternatively, if they don’t think that an HSA is a good fit for you, they’ll say so. After all, we’re here to save you money, not put you into a plan that you don’t need.
Remember: Open Enrollment Ends December 15th
Unless you qualify for a special enrollment period, the last day to make the switch is December 15th. But enrollment can begin as early as November 1st. This means that now is the perfect time to call your Personal Benefits Manager.
This time of year, their calendars tend to fill up fast. Calling ahead to schedule an appointment or head to our website to schedule a free consultation.
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.