A Health Savings Account (HSA) is a tax-advantaged medical savings account available to individuals enrolled in a qualified High Deductible Health Plan (HDHP). Funds put into an HSA are not subject to federal income tax at the time of deposit. The demand for HSAs is growing as employers and individuals realize the advantages of consumer-driven health care. Your company’s HSA plan is fully integrated with all of our pre-tax benefits plans. It’s easy to open, easy to use, and easy to manage.
How You Benefit
Improved Cost Savings
When employees make pre-tax contributions to their HSA, their employer saves. The pre-tax amount is excluded from FICA, Unemployment and Workers Compensation taxes. The more employers encourage their employees to contribute, the more they save.
Affordable Plan Coverage
HSA-compatible health plans provide affordability without giving up coverage through lower premiums compared to traditional plans, slower premium increases and preventive care often covered at 100% before the deductible is met, with no co-payments.
Increased Employee Health
By pairing an HSA program with a wellness program, employers are able to promote and incentivize better overall health. As employees become healthier, their healthcare utilization decreases.
Employees who own an HSA are more likely to be engaged in their health, ask about costs prior to making appointments, seek information about generic prescription alternatives and select lower cost treatment options.
Maximize Internal Resources
The Avidia Health eClaims Manager* is a free service that allows your employees to easily manage every aspect of their HSA, from one place, reducing your HR teams workload.
- Flexibility in controlling benefit costs
- Employee retention and attraction
*Avidia Health HSA holders must register in order to use the free eClaims Manager service. While most major insurances are integrated to the eClaims Manager, not all insurances may be available for this product at this time. It is recommended to check the list of insurance providers prior to signing up for these services. If you do not see your carrier, please check back at a later time as the list is continually being updated.
How Your Employees Benefit
Contributions to HSAs reduce taxable income. Health Savings Accounts grow in the same tax-deferred manner as IRAs. These funds can be used to pay for qualified medical expenses on a tax-free basis.
Gaining Ownership in Healthcare
HSAs return healthcare ownership to the end-user. The accounts are owned by the account holder and the balances roll over from year to year.
Additional Investment Potential
HSAs provide employees with the opportunity to save for future medical expenses and/or invest for even greater earning potential.
Cover Deductibles and Qualified Out-of-Pocket Expenses
Account balances can be used to pay for any qualified medical expense incurred after the HSA is opened. Withdrawals used to pay for qualified medical expenses are tax-free.
Take Control of Expenses
The account holder determines which qualified expenses will be paid from their HSA, how they will be paid and when.
Use HSA Dollars to Pay COBRA Premiums
Preserve liquidity between jobs or during times of unemployment. Special tax-free withdrawals are permitted.
Purchase Long-Term Care Insurance
Use tax-deferred dollars to plan for long-term needs.
Supplement Retirement Income
Once enrolled in Medicare, the account holder may use HSA balances to pay for out-of-pocket Medicare expenses tax-free, or choose to use HSA balances for non-medical purposes by claiming the amount of the withdrawal as income for tax purposes, penalty-free.
What Makes an HSA Program Successful?
Implementing a new healthcare option can be a long and difficult process. It can be frustrating to rollout a new healthcare option to dismal enrollment rates. To make your hard work payoff, you may need to examine your approach to the program design.
The benefits HSAs offer you and your employees will most likely go unrealized unless your HSA program is designed to encourage participation. Below are plan design recommendations and examples that can maximize your enrollment potential.
Plan Design Recommendations
Premium costs of HSA-compatible plans are typically lower than traditional plans; however, with the lower cost is a higher deductible. Here are a few things you can do to ease the transition to your HSA program.
- Offer to pay a higher percentage of the premium
- Provide two HSA-compatible plan deductible levels
- Contribute to your employees' HSAs
Education & Communication
HSAs are relatively new, so education is extremely important. Education is a key component to a successful rollout and acceptance rate.
- Begin your communication early, well before enrollment begins
- Educate your employees and their spouse (when applicable)
Program Design Examples
Premium Concerns – for employees that place a high value on low premium costs.
- Pay 80-100% of employee premiums towards an HSA-compatible health plan
- Offer several deductible options to ease the transition to HSA plans
Deductible Concerns - for employees that are concerned about high deductibles.
- Contribute 50-100% of the deductible to the HSA
Combination – for employees that place a high value on having low premium costs.
- Pay 75-100% of employee premiums towards an HSA-compatible health plan
- Contribute 30-60% of the deductible to the HSA
Contributions to the HSA may be made by the employer and/or employee. The preferred tax treatment, however, will only be recognized by the employee. Some studies show that employers can save 20 to 30 percent in premiums with a QHDHP.
The employer may choose to use all or a portion of those savings as HSA contributions. Contributions must follow the comparability rules or the Section 125 non-discrimination rules if run through the Premium Only Plan (POP) or Flexible Spending Account (FSA).
If an employee terminates employment, he/she maintains ownership of the HSA. However, if an employee doesn’t enroll in a QHDHP after leaving employment, he/she may continue to use HSA funds for eligible medical expenses, but can no longer contribute to it. An employee must enroll in another QHDHP to contribute to the HSA.
HSA Contribution Limits
- Single: $3,400
- Family: $6,750
2017 & 2018 Catch Up Contributions
Participants age 55 or older may make additional contributions above the set HSA maximum. Participants that don’t have a QHDHP the entire year or enroll in Medicare must pro-rate the catch up contribution.
- Single: $1,000
- Family: $1,000
There are two ways to receive a tax credit for HSA Contributions:
- The employer may pre-tax employee contributions through a Section 125 (i.e,. POP or FSA).
- The participant may use an above-the-line deduction when filing taxes. If the tax credit is through a Section 125, the document must state it accordingly.
A self-employed individual of an S Corporation or LLC cannot pre-tax an employee HSA contribution through a Section 125.