What’s an “HSA” and should you have one?


Are health savings accounts important? Paul Ashley from First Person weighs in.

Paul Ashley Discussion (click to listen). Clip courtesy of The Pete the Planner Show on 93 WIBC.

Here is a list of some HSA Pros and Cons:

Pros

  • No ‘use it or lose it’ rule, unlike Flexible Spending Accounts that reset each year so your ability to consume care in an effective and efficient manner keeps money in your pocket.
  • Typically, consumer-driven health plans have a lower cost compared to standard PPO plans. Most people come out ahead as far as the cost of the CDHP with an HSA versus the PPO.
  • HSAs have a triple tax advantage…pre-tax or tax deductible contribution going into the account, tax deferred growth of the earnings, and income tax free when spent on a qualified Section 213(d) expense (see Publication 502 for full list of expenses that are HSA eligible.)
  • Your money is your money, unlike Health Reimbursement Arrangements, so when you leave the company, you can take it with you.
  • Investment options are available at low thresholds for many HSA banks.
  • Employees who are willing to take an active role in their health and health care will see rewards over time.  HSAs are not just for the healthy and wealthy but for those willing to invest in themselves as consumers in the health care market.

Cons

  • Higher deductibles can mean higher bills for doctor visits and the pharmacy – and pharmacy bills especially can be shocking!
  • Higher upfront first dollar expenses can create an strain on cash-flow.  This is often made up for over the course of a year due to lower premiums and tax savings.
  • Your employer might work with a specific bank, which may or may not have what you consider to be reasonable fees.

Success requires active participation so for those individuals who do not want to have to “think” about their expenses these plans may not be a quality match.

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