As the cost of healthcare rises, health savings accounts (HSAs) have risen in popularity among Employers and their employees. According to the Society of Human Resource Management (SHRM), 56 percent of Employers offer HSAs as a benefit—a percentage that is expected to see rapid growth in the coming years. According to Devenir, HSAs have risen 12 percent year-over-year, with assets growing by 20 percent annually. The investment advisory and consulting firm projects that by the end of 2021, the HSA market will approach $88 billion in assets held by more than 30 million accounts.
“As more HSA providers increase investment education, access and remove fees, we expect this number to accelerate,” Shobin Uralil, co-founder and chief operating officer of HSA provider Lively, told Employee Benefit News. “Because of the unmatched tax-advantages, we’re seeing growth in HSAs as a vehicle not only for health savings in the near term, but for anticipated health costs in retirement as well.”
Established under the Medicare Modernization Act of 2003, HSAs are available to those covered by high-deductible health plans (HDHPs). Switching to an HDHP that is linked to an HSA can be a good move for both Employers and their employees. Here are the benefits of an HSA plan.
Both employers and employees will benefit from lower health insurance premiums with an HSA. Instead of paying high monthly premiums for healthcare coverage that may or may not be used, HSAs can provide workers huge savings in lower monthly premiums. As employees take more ownership of their healthcare, employers will also be more likely to see lower increases on annual premiums.
Range of Qualifying Expenses
Employers won’t have to sacrifice employee healthcare coverage when switching to an HDHP/HSA. The contributions in an HSA can be put toward a range of qualifying expenses for medical, dental, vision and mental health services. The IRS explains the eligible expenses in detail in IRS Publication 502.
Tax benefits are a major perk of HSAs. Just like an IRA (Individual Retirement Account), contributions made to an HSA are 100 percent tax deductible from business incomes and paychecks. Because these contributions are pre-tax, the IRS doesn’t consider these contributions wages. As a result, both Employers and employees won’t have to pay FICA taxes on them.
Tax-Free Withdrawals and Growth
Any withdrawals from an HSA to pay qualified medical expenses, including dental and vision, are never taxed. Not to mention, yearly contributions are never forfeited. Unlike a flexible spending account (FSA), any unused money in an HSA rolls over each year, remaining available for future qualified expenses, even if health insurance plans, Employers, Brokers, or employment status changes. The money in the HSA will continue to grow interest tax-deferred.
According to business services firm Clutch, employees rank healthcare as the most important benefit companies can offer. Yet, insufficient employee benefits are a major reason why good workers leave jobs. Because HSAs offer all of the benefits listed above, while allowing employees to save money and invest in the future, they’re a great addition to any benefits package.
Prepare for Open Enrollment
As you prepare for open enrollment, it’s important for Brokers to educate employers and their employees on the value of all health insurance offerings, so they can not only utilize them, but also cut down on health care costs.
In addition to education, health insurance software like FormFire can further ensure open enrollment goes smoothly for your clients. Our all-in-one solution streamlines the quoting process, while providing a shopping-like experience to make comparing and selecting health plans easier than ever. Contact FormFire today if you have questions or would like to learn more about our product solutions.