Why HSAs Can Help People Make Money As Well As Save It

The security of a Health Savings Account (HSA) is more attractive than ever, but there’s a unique bonus inherent in the structure of HSAs – the ability to invest your HSA funds in a safe haven, and build a bigger healthcare nest-egg for the future.

That’s why Rick Monello, CEO of Custom Health Plans, believes that agents will be far more successful offering their clients HSAs than they were last year, as long as they understand the appeal of the investment side of the equation.

Health Savings Accounts, or HSAs, came about as part of the Medicare Reform Act of 2003, and they offer consumers a tax-free option for healthcare. With HSAs, consumers typically employ a high-deductible health insurance policy to protect against major medical expenses, while establishing a savings account to use for small, day to day medical expenses. What makes it affordable is that the high deductible policy is significantly less expensive than traditional HMOs, and the money they deposit into their HSA is PRE-TAX dollars. The law allows people to take money out of their paycheck and deposit it directly into their HSA before they pay taxes on it. So, not only do they save on their insurance premiums, but they are also able to save on their taxes. Moreover, HSA money can be used to pay for ANY medical expense, from over-the-counter headache medications, knee braces or orthopedic shoes. Anything remotely medical can be paid for out of that account, all funded with pre-tax dollars. Finally, at the end of the year, any money left over in the HSA account can be rolled over – tax-deferred – to use the next year. Flex spending accounts don’t allow that – if you don’t use it during the calendar year, you lose it.

These plans were created in response to the rising cost of health care with the intent to give the consumer back the control of their health care costs and in many cases reduce premiums by up to 50 percent.

These unique plans provide consumers greater control, more choices, tax advantages and are generally more affordable than their HMO and PPO second cousins, according to Monello. Plus, the interest in investing their HSA funds is growing.

According to a survey done by Cigna last year, more than 65 percent of HSA customers said they would be interested in putting their excess HSA funds into mutual funds and other types of investment vehicles that are traditionally safe havens for their money. When you consider that HSA funds come from pre-tax contributions, it’s like double-dipping. Not only do they save on their taxes, but they are also able to grow that amount through the investment options now available for them.

“Based on the current economic conditions on Wall Street, nothing in the marketplace can match the benefits of HSAs,” Monello said. “People are afraid to put their money in stocks anymore and they are looking for vehicles with tax shelters with attractive tax benefits. With HSAs, customers can solve both problems: where to safely put your money and how to provide incredible health coverage for your family. HSAs are a good alternative to kill two birds with one stone, provide affordable health care and tax benefits in an uncertain and shaky economy.”