Can I save money with a Health Savings Account?

Is their a plan that covers catastrophic events yet allows me to have some control over how I spend my health care dollars?
Can I use my health savings account with physical therapy treatment?
Yes and Yes! It is called a Health Savings Account!
piggy bank graphic
What is a Health Savings Account?
A Health Savings Account (HSA) is usually paired with a high-deductible health insurance plan (HDHP).  An HSA allows you to deposit funds to be used for health-related expenses into a specially created savings account. You can then use these funds to help pay the cost of your health care. The funds can be used to help meet your deductible and pay for medical services that may not be covered by your insurance plan. Some of these may include dental care, vision, prescription costs, or alternative health care like chiropractic care or physical therapy.  Alternately, you can keep the funds in your account and pay your medical expenses out of your pocket. In this way, the funds can stay in the account and accrue interest over the years. You can then reimburse yourself in the future, after you have benefited from the tax-deferred growth.  This type of health insurance policy will cover catastrophic events yet allow the consumer to have some control over how you spend your health care dollars.  Meaning you will have the power to decide your treatment and care with most health care.

What are the guidelines for a HSA?

To simplify:
  1. Must be enrolled in a qualifying high deductible plan
  2. Employer and/or individual funded and is entirely owned by the individual, even if terminated
  3. Funds deposited are not taxable when deposited nor when spent on approved services
  4. Funds roll over and in some cases can be put into investments within account for higher potential gain in value
  5. Funds are available once deposited
  6. Since you have access to the funds for you and your dependents and there is no concern of forfeiture, put as much as possible into  this account that meets your household’s needs

Is the money in a HSA tax deductible?
The money you put into your HSA is tax-deductible, it grows tax-deferred, and withdrawals to cover medical expenses are tax-free. If you fully fund your HSA account, you can take a deduction of that amount on your 1040 when preparing your taxes, regardless of how much other income you might have.  So, if you are a single person who funds your HSA with the maximum contribution limit of $3,250, your taxable income is reduced by $3,250. For families, the maximum amount is $6,450, and in either scenario, people over the age of 55 are allowed an additional deposit of $1,000 per year.

Additionally, if you are in good health and do not spend large amounts of money on medical expenses yearly, your HSA acts like an interest-bearing savings account that grows tax-deferred, similar to an IRA. You can invest the money in stocks or mutual funds, just like you may with an IRA, and you can use the money for medical expenses at any time without having to pay a penalty or taxes. However, you need to be aware that if you use the funds for non-medical reasons, you will be assessed a 20 percent penalty.  If you choose to leave the funds in the account, you can withdraw them for any reason after you turn 65. You will not pay a penalty even if you use the funds for non-medical reasons, although you will have to pay taxes on the amount you withdraw at that time.

If you own an HSA account and contribute the maximum amount yearly, it is possible for you to accrue as much as $500,000 or more over a 30-year period. Of course, the accrued amount will vary depending on how much you contribute, the return you get, and how much of your funds you use for medical expenses. Regardless, you can easily see what the long-term financial benefit could be.
Are the premiums lower with a high deductible plan with an HSA?
Will an HSA help save me money?
save money graphicAnother excellent benefit to combining an HSA with an HDHP is that, because you are shouldering more of your medical costs yourself, the premiums are typically considerably lower than a more traditional health insurance policy. This can save several thousands of dollars a year in premiums alone.  Also, since you are paying most of your health costs yourself and are using cash to do so, you are in the position to shop around for the best prices on most medical services. Many doctors will often offer a cash-up-front discount to save them the hassle of billing to an insurance company. This also has the potential to be a huge money-saver.

For example:  If you experience low back pain the out of pocket cost for unnecessary imaging, physician visits, and medication can add up quick.  What if you can get the same outcome, or even a better outcome, for 1/2 of the cost?  Look at this example below taking advantage of the cost savings using physical therapy for the treatment of low back pain:

Old and New Approach diagram

For the most part, the ACA has not had a huge impact on HSA accounts. However, the HDHP you choose must be compliant with all of the federally required mandates, and in some areas there are now fewer options available. However, premiums for HSA-qualified plans are still usually significantly lower than other more traditional health policies.

Also, the tax deduction you get from having an HSA account actually lowers your modified adjusted gross income (MAGI) by the same amount. For example, if you contribute the maximum amount allowed of $3,250 for a single person, your MAGI is lowered by that amount. Since premium subsidies or tax credits for purchasing an HSA plan are based on your MAGI, this means that your HSA contribution may help you qualify for additional help paying health care costs.

roll of moneyWiley Long, an insurance broker specializing in high deductible health plans and health savings accounts and President at HSA for America, states 

Since my primary goal as an insurance advisor is to help people save money on their health insurance and other medical expenses, I feel an HSA combined with an HDHP is by far the better way to go for most people.

Health savings accounts can still get you the best physical therapy treatment and save money!
It sounds like to me that a HDHP with an HSA is the way to go!  You will still be covered for catastrophic coverage and you will be in control/have the freedom to choose your treatment and what doctors to see for your care.  You can also save money by having cheaper health care costs, transferred money is tax deductible and many premiums are cheaper with these plans.  Please call us at Pursuit Physical Therapy at 407-494-8835 if you have any questions about HSA and what you can use them on.  Many of our patients use their HSA at Pursuit Physical Therapy for cheaper health care, saving money, and to receive the high quality one-on-one patient care they deserve.

References:

Wiley Long, An Overview of Health Savings Accounts November 18, 2013.

Robert A. Washick, MBA.  VP/CEO Professional Benefit Administrators, Inc. Guest Blog

HSA will survive Obamacare….At Least for now

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