Wage Up! Let your HSA help cushion the blow of a medical emergency

Health savings accounts (HSAs) are great financial planning tools due to their triple tax benefits. When you're healthy and earning money, it makes sense to divert part of your paycheck to your HSA so your dollars can grow tax-free and compound over time, or to let your HSA from a previous insurance plan ride the market untouched on autopilot.

But what happens when the rainy day fund meets a downpour? A medical emergency is when you need to shift from saving to withdrawing your funds, prioritizing the "health" part of "health savings account."

We've talked before about using your HSA for elective treatment such as joint replacement surgery. But what if you suffer a crisis that changes the course of your life: A traumatic event such as a car accident, or a medical event like a stroke or even a cancer diagnosis. Your life is suddenly divided into before and after that fateful day, and you face months of treatments, uncertainty and expenses.

As you come to terms with a new reality, your HSA can be a source of financial comfort as the bills start to roll in. Even if you changed insurance and no longer have a high-deductible health plan (HDHP), as long as you established your HSA before the medical emergency began, you can tap your funds to reimburse qualified medical expenses.

The same is true for Medicare. Once you're enrolled, you can't contribute to your pre-existing HSA, but you can still use your funds for their intended purposes. Work with your family members and support team to ensure your HSA is put to use to help cover eligible medical expenses, like:

  • Surgery and transplants
  • Hospital services
  • Physical therapy
  • Occupational therapy
  • Speech therapy
  • Home medical equipment
  • Counseling
  • Many more...

Some of these may require a Letter of Medical Necessity, so speak with your HSA administrator if you're unsure.

A few notes…

Nursing services are eligible, as long as care is nursing-related and not custodial in nature like a home health aide, which is not currently eligible. Home health aide services can be a big out-of-pocket expense, depending how much assistance you need for activities of daily living like showering, dressing and preparing meals.

A bill in the House of Representatives, H.R. 6813 (the Home Care for Seniors Act) proposes to make such in-home care an HSA-eligible expense.

  • Transportation to essential medical care, including ambulance rides, travel by bus, taxi, train or airplane, and rental cars if you need them. Keep track of your mileage to and from appointments and hold onto receipts for parking fees and tolls as well. The IRS-set mileage reimbursement rate for medical purposes for 2018 is 18 cents per mile.
  • Hotel rooms that aren't extravagant are eligible with a Letter of Medical Necessity from your doctor. Reimbursement is not available for regular meals with the exception of meals provided during a hospital stay.
  • Home modifications like installing grab bars or widening door frames if needed to accommodate your condition can also be eligible under the right conditions. This article about universal design can shed a little more light on the subject.

Of course, planning for a worst-case scenario is never fun. But as HSA holders grow older, the possibility of needing to tap the money to cover medical emergencies rises.

Should the unthinkable happen, don't be afraid to use the money for what it's for: To help you recover from injury and illness so you can reach your highest functional level and live the life you want.

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Whether you're spending steadily or saving for something, Wage Up! is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.

Compound It! Want to grow your HSA? Contribute!

If your health savings account (HSA) sits idle without any contributions to grow your funds, is it still an HSA? Yes, of course, but it won't do you nearly as much good.

Many employers and financial planners encourage people with HSAs to put some money into their accounts so the balance can grow and compound over time, potentially covering more out-of-pocket health costs.

Half of HSA owners did fund their accounts to some degree in 2017, and only 13% contributed the maximum amount allowed, according to new data from the Employee Benefit Research Institute (EBRI), a nonprofit research group in Washington. But 36% of HSAs didn't receive any contributions, either from employee or employer.

Of the HSAs with contributions, the average employee contribution was $1,949, with employers kicking in $895 on average, according to EBRI.

Why aren't more than a third of HSA owners contributing to their accounts at all? Some accounts may belong to people who've disenrolled from high-deductible health plans in favor of a more comprehensive health plan, making those HSA owners ineligible to contribute money. For those still eligible but not contributing, a combination of factors is at play.

Jobs in the gig economy are notoriously unpredictable and low-paying. Fewer raises for employees and rising housing and healthcare costs also constrain workers' ability to contribute, said Steve Wojcik, vice president of public policy at the National Business Group on Health in Washington, which represents large employers, those with 10,000 or more workers.

"People's wages have kind of stagnated, and a lot of people are living paycheck to paycheck and healthcare costs are going up," he said. "All those things work against investing and building up your account."

"I guess they're hoping that at some point they'll be able to put money in there or be lucky enough to have an employer that puts money in for them," Wojcik added.

Something is better than nothing

A brief review is in order: As long as you have a qualified high-deductible health plan and are not on Medicare, you are eligible to contribute to your HSA. Assuming you're not self-employed, your employer may contribute to your HSA as well. Even a little bit helps.

For 2019, total contribution limits, including those from employer and employee, top out at $3,500 for single policies and $7,000 for family coverage. That's an increase of $50 for singles and $100 for families from 2018 maximum contribution levels.

HSA contributions are either pre-tax if you're employed and your employer provides you with the option or tax-deductible if you're self-employed or don't have the option to set aside pre-tax funds from pay, and they grow tax-free. As if that's not enough, distributions are also tax-free as long as you use the money for qualified health expenses. That's the triple tax benefit HSAs are known for.

What's more, you can continue to withdraw your HSA funds once you're on Medicare even though you're no longer allowed to contribute to the account.

Most people (82%) enrolled in HSAs as part of a high-deductible health plan have them through a large employer, those with 50 or more workers, according to data from America's Health Insurance Plans (AHIP), a trade group in Washington. The remainder either have them through small employers or buy them on the individual market.

The good news is many of those large employers help their workers with contributions, especially when workers first switch from a more comprehensive health plan to a high-deductible plan that can cause sticker shock until that deductible is met, said Wojcik of the National Business Group on Health.

For 2019, 61% of large employers who are offering high-deductible plans with HSAs say they will contribute to those accounts, with a median HSA contribution of $500 for individuals and $1,000 for families, according to NBGH. Median means half of respondents plan to contribute more and half will contribute less.

The average account balance varies by how long owners have had their HSA, said Paul Fronstin, "director of EBRI's Health Research and Education Program.

"Most accounts are new, so most balances are going to be low," he said. But that can change.

"The longer you have had the account, the higher your personal contribution and the more likely you are to invest...instead of just leaving it in a non-interest or token interest-bearing account," he said.

Over time, more people start to see the benefits of HSAs' triple tax advantage and contribute more and invest more -- even if they have to take more money out, EBRI found.

Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.

Compound It! Haven't invested your HSA funds yet? It's a good time to start

Health savings accounts (HSAs) were created in 2003 and rolled out in 2004, but it took a decade before they saw substantial growth in market share. Nearly three out of four HSAs (73%) were opened during the four years between 2014 and 2017, according to new data from the Employee Benefit Research Institute (EBRI), a nonprofit research group in Washington. But that doesn't mean HSA owners are getting the most bang for their buck.

In fact, only 4% of HSAs in the EBRI database of 6 million HSAs had invested assets beyond cash last year, meaning the vast majority of HSA funds were parked in low interest-bearing savings accounts.

So why are so few account holders investing their money?

More than one reason

Several reasons come to mind for Steve Wojcik, vice president of public policy for the National Business Group on Health, which represents large employers in Washington, D. C.

First, people may not look to their HSA as the first place to invest their money, especially if they have a 401k or other retirement plan.

"They think of it (HSA) for their healthcare expenses, not necessarily for investing," Wojcik said. "Obviously, if you invest and get a return better than savings account interest, you're likely to have more money for healthcare in the future, but people don't usually make that connection."

"The general difficulty of getting people to think of the future and plan for retirement probably carries over to the HSA as well," he added.

Secondly, many people also may lack enough money in the accounts to invest it, Wojcik said. He noted that some banks require a minimum balance -- $1,000, for example -- before HSA owners are allowed to invest their funds. It's a way of keeping a portion of funds liquid and easily accessible for use.

"That's for your own protection because if you have significant healthcare needs it's probably best to have it in cash," he said. "I think they want to make sure you have a sufficient amount in your account to cover immediate or short-term health care needs before you think of taking anything out of what you invested in it."

Choices involved in investing may also deter some people, Wojcik said, noting that he doesn't know how many investment options he has for his own HSA and can only guess at his account balance.

Differences in perspective

When EBRI asked HSA owners how they viewed their accounts, only 19% said they viewed it as an investment account compared with 58% who saw it as a savings account, 20% as a checking account, and 19% reported none of the above. (Respondents were allowed more than one answer.)

"They're much more likely to view it as a spending account than a savings account," said Paul Fronstin, director of EBRI's Health Research and Education Program.

HSA owners who Invested their money beyond cash had higher account balances on average compared with those who kept their money in low or no-interest cash options. But they were no less likely to spend the money to self-fund current medical expenses when needed, EBRI found.

For accounts opened in 2017, which was an unusually good year for the stock market, investors beat non-investors handily. By the end of the same year, balances averaged $5,849 in accounts with investments beyond cash compared with $987 for accounts without investments, according to EBRI.

Market risk and reward

Of course, there's always a risk the stock market will go down in any given year, but investing historically has produced the biggest gains for people over time. In the four years that saw the biggest growth in HSA adoption, the S&P 500 Index, considered a benchmark of stock performance, returned a remarkable 47%, according to an analysis of annual returns data from Morningstar.

HSAs opened in 2017 ended 2017 with an average balance of about $1,100, according to EBRI. How does that compare with accounts opened a decade ago? "Those accounts now have a balance of $8,384," Fronstin said. That reflects 10 years of contributions, possibly both from employer and employee, and the power of compounding, minus any distributions that workers took out.

Older accounts are a little more likely to be invested than newer ones, he said. "That would help run up the account balance. It's the benefit of time."

EBRI's HSA database represents nearly six million accounts with total assets of $13 billion as of Dec. 31, 2017, or approximately 27% of the total HSA market. There are an estimated 22.2 million HSAs.

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Compound It! is your weekly update of achievable, effective, no-nonsense HSA saving, buying and investment advice, delivered by people who make it work in their own lives. For the latest info about your health and financial wellness, be sure to check out the HSA Learning Center, and follow us on Facebook and Twitter.


Wage Up! Making universal design work for you

Think about your home for a minute. Is it easy to move around in? Could you do so safely if you used crutches, a walker or a wheelchair? Is it welcoming to children and guests of all ages? If you can't picture yourself living in your home as you get older, then perhaps it's time to look into universal design concepts that allow for aging in place. Your health savings account (HSA) can even help you cover some of the expenses, depending on your circumstances.

Universal design aims to eliminate unnecessary complexity and make structures, technology and products friendlier to a wider range of human needs across the lifespan. It's "the design of products and environments to be usable by all people, to the greatest extent possible, without the need for adaptation or specialized design," according to a widely used definition from North Carolina State University's Center for Universal Design.

The concept has seven principles: Equitable use, flexibility of use, simple and intuitive use, perceptible information, tolerance of error, low physical effort, and size and space for approach and use.

Chances are you already own or have seen examples of universal design, such as kitchen tools with thicker hand grips, grab bars in bathrooms or a voice-activated digital home assistant.

Demand for universal design features like a full bathroom on the main level, wider hallways, and doorways at least 36 feet wide is heaviest in areas dominated by baby boomers, said Joanne Theunissen, remodelers chair of the National Association of Home Builders. She noted that people like the feeling of open space, but may have a misconception that universal design means an institutional appearance.

The concepts are starting to catch on as more people find they can blend practical features into their living space without sacrificing aesthetics.

"All universal design techniques need to be done well so they integrate with the design of the house," Theunissen said. "They don't have to scream 'aging in place.'"

With older housing stock especially, homes that have smaller door frames and hallways (generally less than 36 inches and 40 inches, respectively), are difficult to maneuver around with mobility aids. It's not unusual during estate sales for such houses to show wear from walkers and wheelchairs that have trouble making the turns, Theunissen said.

Starting small

Making your home more accessible may sound like an overwhelming and expensive task, but it doesn't have to be. A few easy hacks can enhance safety and reduce the physical effort required to move around without compromising the look and feel of your home.

For example, you may want to invest in the following low-maintenance items to improved your safety and comfort:

  • Lever door handles to replace door knobs for ease of use
  • Light switches at the top and bottom of stairs
  • Railings on all stairs, ideally on both sides
  • Grab bars positioned in and near the tub or shower -- Some designs incorporate towel racks or match faucets for a more integrated look. They cost anywhere from $40 to $300, depending on brand and style, Theunissen said.
  • Seating in showers
  • Non-slip floor surfaces -- From the bathroom to the living room, non-slip surfaces can deter falls. Consider adding low-pile carpet to slippery steps. Falls are a major public health problem, and the risk for falls increases with age. Falls result in 3 million people over 65 requiring emergency room treatment every year, according to the Centers for Disease Control and Prevention. They are a leading cause of traumatic brain injuries and hip fractures.

Planning for home modifications

When it comes to making over your home with universal design in mind, some fixes are more complex than others. Widening interior door frames may be a quick job, or a more involved capital expenditure, depending on the structure of your home, Theunissen said.

Retrofitting a house with projects like a zero-step entrance, lower kitchen countertops or four-foot hallways requires planning, including financial. If you're making such changes to accommodate a progressive medical condition, or even preventively, you may be able to tap your health savings account as long as you discount any increase in home value from the upgrades and can document the need.

Remember, there's a "no double dipping" rule, so if you itemize your deductions, you cannot deduct medical expenses already paid for with tax-free dollars or by someone else.

Whether you're spending steadily or saving for something big, Wage Up! is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.


Wage Up! When elective surgery triggers eligible expenses

If you've ever had chronic knee or hip pain, you know elective surgery doesn't feel so "elective." Surgery is typically the last resort when a joint suffers from arthritis or trauma and doesn't respond to medication and physical therapy.

If this describes you, you're not alone. Joint replacement surgeries, specifically hip and knee arthroplasties, are among the most common non-emergency inpatient operations performed in the U.S. What's more, you can tap into your health savings account (HSA) funds to pay for eligible post-surgical needs aimed at improving your day-to-day activities.

As you plan your recovery, don't forget that you'll have new movement restrictions that require the use of items that allow you to dress yourself without risking your healing. The money in your HSA can be used to pay the cost of adaptive equipment that's not covered by your insurance.

For hip replacement surgery, five tools are typically needed to continue performing your activities of daily living -- showering, dressing, etc -- as independently as possible while you recover. You can often purchase them in a "hip kit" that includes a reacher (also known as a grabber), dressing stick, sock aid, long-handled sponge and long-handled shoe horn. These tools are needed to extend your reach and prevent you from bending past 90 degrees at the waist.

Depending on your height and the height of your toilet, you might need a raised toilet seat or commode to keep your knees below your hips in a seated position. At the hospital or during home care, an occupational therapist will make recommendations and teach you how to use these items to increase your independence and reduce the burden on caregivers.

Before bathing, you may need to cover your incision with a folded garbage bag and paper tape, another HSA-eligible expense, to keep the wound dry until your doctor tells you otherwise. If you don't have a shower chair, investing in one is a good idea to increase safety and conserve your energy. We recommend getting a doctor's note for use of these items prior to submitting them for HSA reimbursement.

(People are usually pretty surprised by how tiring showering can be after surgery.)

And if you have a combination tub-shower with a high threshold that requires raising your leg high, you could benefit from a tub bench for safer transfers into the shower. A long-handled shower hose can give you more control as you wash while seated. Grab bars mounted in and around the shower can prevent falls and enable safer showering with your new joint. They provide a more secure option than gripping a towel rack.

Knee replacement patients typically have less post-surgical precautions needing use of adaptive equipment, but they can benefit from some tools early in the healing process since your mobility is limited by swelling and pain. A leg lifter -- a nylon stick with a loop at the end to hook your foot through -- can make it easier to get into and out of bed by yourself.

If you live alone or have surgical complications, you also may need a reacher, sock aid and long-handled shoe horn during the early phase of your healing.

Whether your surgery is for a new hip or a new knee, getting up and walking again, as long as you can tolerate weight-bearing, is a high priority. Many patients first do so with the aid of a front-wheel walker and sometimes a manual wheelchair.

Medicare and other insurers often cover the cost of such durable medical equipment for use in the home as prescribed by your doctor, subject to rules and cost-sharing. But in case they don't, walkers and wheelchairs are HSA-eligible expenses.

Physical therapy and therapeutic exercises that you continue to do at home will be important to your healing and ease the return of motion in your joints. As you recover and start to feel more like your old self again, another piece of good news: physical therapy is eligible for HSA reimbursement!

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Whether you're spending steadily or saving for something, Wage Up is where we highlight the latest services available to buy with your HSA, every Monday on the HSA Learning Center. And for everything else about your health and financial wellness, be sure to follow us on Facebook and Twitter.