Taxes

Tax Facts: How an HSA can lower your taxes each year

Now that this year's tax season is just about here, we figured this was the perfect time to think about lowering your taxes -- because we're pretty sure everyone wants to lower their tax bill. It's a national pastime -- hunting around for little-known deductions and credits that may decrease how much you owe at the end of the year.

But one method that people often forget about is your health savings account (HSA). Now that more people are joining high-deductible health plans (HDHPs), more people are eligible for HSAs. However, they're often not aware how saving money in an HSA can dramatically affect their taxes.

Let's try an example...

Say you want to lower your taxes and save for upcoming medical expenses. Here's how you can lower her taxes with an HSA, along with a quick look at the rules you need to follow.

The money you contribute to your HSA is non-taxable, just like it is if you contribute to a traditional 401(k), IRA or other interest-bearing account. When you contribute money to an HSA, it decreases your adjusted gross income (AGI) which determines your taxable income.

Since the U.S. runs on a tax rate system based on your income, the lower your AGI, the lower your tax bill.

If you're working as a W2 contract employee, you might be lucky enough to have an employer who contributes to your HSA. Employers are able to contribute to an employee's HSA without those funds counting as taxable income, unless it exceeds the HSA limit.

(In 2020, the annual limit for HSA contributions is $3,550 for individual health plan participation and $7,100 for family participation, while those 55 or older can contribute an extra $1,000 per year.)

The benefits of contributing to an HSA

It doesn't hurt to contribute to your HSA, even if you're not sure you're going to need all your HSA money for that coming year. HSA funds roll over from year to year and can even be assigned to a beneficiary in the event of your death.

This money is also eligible for investment. If you have an excess of HSA funds, such as $2,000, you may be able to invest the money several ways, depending on your HSA provider. In some ways, that makes your HSA a back-up retirement account; this is perfect for people who have already maxed out their 401(k) and IRA.

When you withdraw funds from your HSA for qualified expenses, the money also comes out tax-free, a perk not available to other types of accounts. When you use a Roth IRA, you pay taxes on the contribution, but not on the distribution. If you have a traditional IRA, you don't pay taxes on the contribution, but your distributions aren't taxed.

By comparison, your HSA doesn't tax contributions or qualified distributions. Win-win, for everyone involved.

Some tax-free essentials


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Tax Facts is a weekly column offering straight up, no-nonsense HSA tax tips, written in everyday language. Look for it every Tuesday, exclusively on the HSAstore.com Learning Center. And for the latest info about your health and financial wellness, be sure to follow us on Facebook and Twitter.

Accounts

Compound It! What if you have "buyer's remorse" after open enrollment?

As consumers, we're used to a certain level of protection from our own bad decisions. If we change our mind about an item we bought, we can usually return it. If a company doesn't offer returns, we can apply for a chargeback on the credit card we used. If the chargeback is denied, we can sell the item online to recoup most of the cost.

But sometimes, buyer's remorse is a lot trickier to deal with. When you sign up for the wrong health insurance plan, you can't just head to the Marketplace and exchange it for a new one. You have to contend with specific rules unique to our health insurance system.

If you regret choosing the wrong plan, you're not completely out of options. Read below to see where you stand.

What to do

Even if you've already signed up for health insurance, you still have time to cancel and change your plan before open enrollment ends. If the enrollment window has already closed, you're out of luck.

If you're not happy with your insurance plan after open enrollment has ended, you don't have many options. The only circumstance where you can change your insurance plan outside of open enrollment is if you have a qualifying event. This triggers a Special Enrollment Period (SEP) when you can enroll in health insurance, just as if it's open enrollment again.

A qualifying event typically includes:

  • Losing your job
  • Having a child or adopting a child
  • Getting married or divorced
  • Moving to a new ZIP code or county
  • Losing your health coverage due to job loss

For example, if you're not happy with your plan and end up having a baby mid-year, you can change your plan without any penalties or repercussions. If you have a plan through the Marketplace and lose your job, you can now sign up for a new plan.

Once your qualifying event has occurred, you have 60 days to sign up for coverage (some plans may only allow 30 days, so make sure to find out quickly). After that 60-day window has expired, you won't be able to buy coverage again until open enrollment or another qualifying event.

Outside of a qualifying event, there's no other way to sign up for new coverage if you've changed your mind.

You can cancel your health insurance coverage during the year at any time. Because the individual mandate was recently repealed, people who don't have health insurance won't have to pay a penalty for forgoing insurance. You won't have health insurance, but you also won't have a stiff fine to pay at the end of the year.

Other options...

One interesting (but potentially risky) alternative to standard insurance is to sign up for a healthcare sharing ministry. These ministries aren't classified as health insurance, but they work similarly. Members pay a monthly premium and have an annual "unshared" amount that functions like a deductible.

These premiums are often less expensive than plans on the Marketplace, and members can usually see the same doctors they had before.

Ministries often require their members to be religious and don't cover medical bills for acts they deem immoral. A health care sharing ministry doesn't have to follow the rules of the Affordable Care Act, so pre-existing conditions typically aren't covered.

Healthy must-haves

Caring Mill Travel Heating Pad

$17.99


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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.

Accounts

Compound It! What if you don't like your employer's HSA options?

Employer-sponsored investment and insurance options are usually a blessing. They're low-cost, easy to enroll in, and often come with a contribution-matching option. As someone who left a traditional job with a full benefits package to become a freelance writer, I'll admit that open enrollment often makes me question that decision.

But not all employer-sponsored plans are created equal. With HSAs in particular, there are plenty of sensible reasons to look elsewhere.

Reasons why you might not like it…

Before we dive in, let's be very clear -- there are a LOT of benefits to using your employer's HSA. Most notably, the convenience of having contributions coming directly from your regular payroll deposit, saving you any concerns or missed contributions. We understand that these are big decisions, and recommend speaking with your administrator before making any decisions.

That said, HSAs are like most other accounts. Every bank has its own features, fees and benefits, so no two accounts are exactly alike.

Here are some ways HSAs can differ:

  • Investment thresholds: Most banks let you invest the funds in your HSA after you've reached a $2,000 minimum, but others require a higher threshold. If investing your HSA is a priority, find a bank with the lowest possible minimum. There are a small handful that allow investing with just $1,000.
  • App functionality: Apps associated with HSAs can range from sleek to bulky. If you're not happy with the options available on your HSA app, you might be better off finding a more user-friendly option.
  • Investment options: Just like a 401(k) at one employer might have a better selection than a 401(k) at another, one HSA bank may offer a wider variety than its competitor. Again, this information is only valuable for investors. If you plan to spend down your HSA or keep it all in the cash portion, you don't have to worry about this.
  • Fees: Like regular bank accounts, HSAs sometimes have monthly maintenance fees and other charges. The fees are usually between $2-5, but can add up quickly if you're a longtime account holder.

How to work through this...

If you don't like your employer's HSA, your best option is to open your own HSA and transfer the money you've been saving into that account! If your employer contributes money to your HSA every month, you can set up monthly transfers of the same amount to funnel cash from one account to the other.

This strategy is a little complicated and requires extreme vigilance, so anyone who struggles to juggle their investments or frequently forgets account information should steer clear. For example, if your employer reduces their monthly contributions, you have to change the transfer amounts to avoid overdrawing your account.

You also have to be mindful of your account balance every time you make a payment or risk further overdraft.

Here's how this system would work:

  1. If it's not already active, open an HSA with the employer-provided bank.
  2. Open an HSA with a bank of your own choosing.
  3. Set up automatic transfers or make manual transfers to your personal HSA.
  4. Be sure not to count contributions to your HSA twice on your taxes.

We won't lie - this is a difficult decision. And we're certainly not investment professionals - this isn't financial advice, just one take on the situation. (Always seek the guidance of a licensed, qualified financial professional before making these decisions.) But if you're currently evaluating your employer's HSA, consider the above rundown and carefully weigh your options before making any significant moves with your account.

Some eligible options to consider

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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.

Accounts

Compound It! HSA-eligible plans and the marketplace

When I worked a traditional office job, choosing a health insurance plan was easy. I had to make a few choices, but for the most part my plan was chosen for me. All I had to do was sign some paperwork.

But since becoming self-employed, that process has become a lot more complicated. I've had to learn how to navigate the Health Insurance Marketplace (marketplace), weigh my options and choose a plan that best fits my specific situation. I've also had to learn how to determine which plans are HSA-eligible.

As droves of people become self-employed and companies limit their healthcare options, more consumers across the country are having to make those same choices. If you're still deciding about your 2020 health care options, take a look at what I've learned about how to buy an HSA-eligible plan through the marketplace, and how you can do the same.

What is the marketplace?

The health insurance marketplace is a website where people can shop for insurance plans. These sites were constructed after the passing of the Affordable Care Act in 2010, intended as a way for consumers to compare plans objectively. In most states the marketplace is Healthcare.gov, but some states have their own marketplaces.

When you apply for health insurance through the marketplace, you first have to enter your personal information. The site asks for your name, social security number, the number of people in your household, your income and whether or not you have access to health insurance through an employer.

In short, if you earn below 400% of the federal poverty guidelines, you'll qualify for a federal subsidy to ease the cost of insurance.

Once the site has your information, including basic health details, they'll outline what plans you're eligible for. The amount and quality of plans you see will depend on where you live and how many insurance companies provide coverage through the marketplace. Some states only have one insurer that provides marketplace-eligible plans.

You can rank and filter the plans by cost, coverage type and more. If you're looking for an HSA-eligible plan, you can scroll to the high-deductible plans to see which ones fit the bill.

A helping hand...

Thankfully, there's a simpler way to find an HSA-eligible plan. When you're browsing through the marketplace, look for the plans that say "HSA" or "HSA-eligible" next to them. HSA eligibility only matters with medical plans, so you can choose any dental or vision plan and still use your HSA funds with those.

This year, I almost messed up while looking for an HSA-eligible option. I had picked a high-deductible plan and almost enrolled before I decided to double-check its HSA status, only to find out it didn't meet the right requirements. That's when I noticed another high-deductible plan with "HSA" in its name. If I hadn't taken a second look, I'd be out of luck until the next enrollment period.

If you're having trouble picking a marketplace plan that comes with an HSA, you can call the customer service line at 1-800-318-2596. You can also find local, vetted experts to help you choose the right plan.

If you're shopping for coverage toward the end of open enrollment, don't be surprised if lines are long and call centers are busy. That's why it's best to start the process early, while you have plenty of time to make the right choice.

Eligible favorites

LifeSource UB-521 Digital Wrist Blood Pressure Monitor

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dpl Foot Pain Relief Slipper Size Regular

Relief of pain and stiffness associated with arthritis and other physical ailments.

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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.

Basics

Future Healthy: Common HSA mistakes and oversights

Having an HSA is great for keeping track of your health-related expenses. It makes it easy to get a tax deduction and to set aside money for expensive treatments. But HSAs aren't foolproof and many require more diligence than what one might expect. It's not uncommon to mess up when you're using an HSA for the first time.

Here are the most common HSA mistakes - and how to avoid them.

Using an HSA when you're not eligible

The biggest mistake you can make with an HSA is to use one when you're not allowed to. If you have a high-deductible plan and then switch to a lower deductible, you won't be able to contribute to your HSA. You can still use any leftover funds you have, but you can't add more money to your account.

Some people make the mistake of opening an HSA when a deductible is too high. Always compare your insurance plan to current HSA rules, as the guidelines change every year.

Paying for ineligible expenses

Not every health-related expense is eligible for HSA reimbursement, such as cosmetic services, elective surgeries and gym memberships. Over-the-counter prescriptions are only eligible expenses when a doctor has specifically written a prescription for them.

If you pay for nonqualified expenses with your HSA, you could face a 20% fine. Any time you use your HSA card, keep the receipt so you can prove it was for a qualified medical expense.

Contributing too much

Like an IRA or 401(k), an HSA has an annual contribution limit, which is $3,500 for individuals and $7,000 for families in 2019 ($3,550 and $7,100 respectively for 2020). If you put in too much and don't remove the excess funds before April 15 of the tax year, you'll pay a 6% fine.

Paying someone else's medical bills

The IRS says you can only pay for someone else's medical bills with your HSA if they're your spouse or qualified dependent. A dependent must be someone who lives with you and who depends on you for at least 50% of their financial needs.

Boyfriends, girlfriends, domestic partners and roommates are not eligible for your HSA money, even if you're paying for the rent. If your fiancee is on your health insurance plan, you still can't use HSA money for her medical bills.

Using all of your funds

The money in an HSA account rolls over from year to year, with no limit. Unfortunately, some people confuse HSAs with FSAs, which must be used in the same calendar year that contributions are made.

Think of an HSA like a savings account. You can keep the money there as long as you want without any penalties. You can even leave an HSA behind your will which your heirs can use tax-free.

Using an HSA and FSA

Under current IRS regulations, you're not allowed to have both an HSA and FSA, unless the latter is "limited purpose" or only used for dental and vision expenses. If you discover you or your spouse have both, you'll have to close one of them.

Smart spending decisions

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Clear Care No Rub Cleaning & Disinfecting Solution Value Pack

For simultaneous cleaning, daily protein removal, and disinfecting.

$23.99


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Whether it's for covering medical expenses, or planning bigger investments, our Future Healthy column will help support your path to retirement, no matter where you are on the journey. And for the latest info about your health and financial wellness, be sure to check out our HSA Learning Center, and follow us on Facebook and Twitter.

Basics

Future Healthy: How to find HSA mobile apps to manage your savings

If you're like me, you have probably have too many apps on your phone. Every once in a while, I scroll down wondering why I haven't deleted all these apps that are just taking up space. Apps that I downloaded months ago and never used, apps for subscriptions I canceled and apps for accounts I no longer have.

And of course, there's your HSA app. Even though I had one downloaded, I didn't even know you could manage your HSA from an app until a few months ago. But like any bank account, you can (and should) manage your HSA from your fingertips. And if you have the right HSA app, you don't even need use a computer to do it. Read on to see what you need in an HSA app - and how to find it.

These are separate apps?

In many cases, yes, financial institutions are releasing standalone apps to help you manage your health savings. But even if your HSA bank doesn't have a dedicated app for the account, chances are their standard banking app will allow you to handle most of the same functions.

That said, dedicated HSA apps are starting to pop up everywhere. Some prime examples include MyHealth (by Bank of America), HSA Bank (a division of Webster Bank), HealthEquity and Optum Bank. And chances are, we missed a bunch of them, so check with your administrator to see what your options are.

What to look for

Not every HSA app is created equal. Some offer limited, basic account overviews without much account management. Others are more intricate, but offer unprecedented levels of account control and usability -- perfect for a mobile-savvy user. Ideally, your app will allow you to get clear views into account activity, offer fund transfer ability and most importantly, simplify the process.

There's no point in having a mobile app that makes your HSA more complicated than it needs to be, right? Some things to be mindful of before you download an app:

iPhone and Android accessibility

People change phones like they change shoes, so it's always good to know that your bank's app can be accessed on multiple platforms. But, not every app will be available on both iPhone and Android phones and if you sometimes switch between the two devices, you'll want an app that offers both. If you only ever use an iPhone, your options will be greater than if you're primarily an Android user.

Instant transfers

A basic HSA app will let you transfer money from your HSA to your checking account. This is helpful if you ever accidentally pay for a medical expense with your credit card and want to reimburse yourself from the HSA.

Not every app will let you handle external transfers from your HSA to a separate checking account at a different bank. Even if you can do so easily at your desktop, you might not have that ability through the app.

Account balance

Almost every HSA app offers this feature, which lets you see the account's current balance. Having the account balance at your fingertips prevents you from overdrawing on the account, which can result in heavy fees.

Mobile document uploads

Every time you reimburse yourself for a medical expense or use your HSA card, you should upload the receipt to your HSA. Attaching the receipt to your HSA account will make it easier if the IRS ever wants you to prove that you spent HSA money on qualified medical expenses.

Find an HSA administrator (if you have the option to shop around) that allows you upload receipts via their app, so you can do it at the doctor's office or as soon as you pay the bill. If your app doesn't allow mobile uploads, you'll have to scan the receipts from a computer, a more time-intensive process.

How to change your app

If you participate in an HSA outside of your employer and you're unhappy with the app, don't worry. You can set up another HSA with a different bank account and transfer funds from the first to the second. Make sure you track your accounts so there's never confusion about which account is which. If you do open a second account, pick one without a monthly maintenance fee.

Connected health care

A&D UltraConnect Wireless Wrist Blood Pressure Monitor

Unlimited readings on the A&D Connect app.

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Withings Thermo Smart Temporal Thermometer

Monitor your family's health directly from your iPhone.

$99.99

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Whether it's for covering medical expenses, or planning bigger investments, our Future Healthy column will help support your path to retirement, no matter where you are on the journey. And for the latest info about your health and financial wellness, be sure to check out our HSA Learning Center, and follow us on Facebook and Twitter.

Eligibility

Wage Up! Why I decided a gold health plan wasn't right for me

In 2018, I was diagnosed with a BRCA1 genetic mutation. In short, that means I have a significantly increased risk of developing breast and ovarian cancer. My grandmother died of ovarian cancer at 43, so the diagnosis wasn't entirely surprising.

I've decided to go the preventative surgery route - a double mastectomy and reconstruction, as well as double ovarian and Fallopian tube removal. As you might have guessed, this route comes with a heavy price tag.

With that in mind, I set out to find the right insurance plan to cover those costs today, settling on a high-premium Gold plan. Here's what I discovered when open enrollment started.

Why I wanted a Gold plan

When my husband and I moved back to Indiana last year, I had to sign up for health insurance through the marketplace. As I looked through the different plans, I noticed that the Gold-level plans had a much lower deductible and out-of-pocket max than the Bronze plans.

That's usually how health insurance plans work. You can either pay a low premium every month and have less of your expenses covered, or pay a high premium and have more covered. The Gold-level plans had a monthly premium of $1,000, while the Bronze plans had a $650 premium.

After doing the math, I realized I would save $3,000 if I went with a Gold plan. I decided that if I still wanted to get surgery in January, that was my best option. I ran the numbers over with my financial planner and he agreed.

What actually happened

When open enrollment for the Healthcare Marketplace became available, I immediately started signing up. That's when I discovered that the plans had changed - the Gold options had almost the same out-of-pocket max as the Bronze ones, give or take $50.

I was so confused. I called the Marketplace's customer service line and spoke to a representative who confirmed what I was seeing. She was just as baffled as I was. She said, "Usually, the out-of-pocket max is lower on those Gold plans."

After redoing the math, I realized I would spend $4,246 more if I went with the Gold plan. Plus, if I chose the right Bronze plan, I could have an HSA to pay for my expenses. That means I'd save even more with the Bronze plan by deducting those expenses on my taxes, approximately $1,500.

Why it pays to check

If I had gone with the Gold plan automatically, I'd be overpaying by almost $6,000 for the same coverage. I'm so glad I went through the plans carefully, even though I was so certain about what I wanted.

Choosing a health insurance plan isn't something you can do on autopilot. Premiums, out-of-pocket amounts and deductibles can change every year, so picking the same plan without checking is a dangerous game.

If your health needs have stayed the same, it's still a good idea to consider each available plan. Do the math yourself to see what makes sense. If you're like me, keeping an HSA-eligible plan might be more advantageous than having slightly more comprehensive coverage.

Home testing needs

LetsGetChecked HbA1C Diabetes Home Test

This home diabetes test for HbA1c can help identify pre-diabetes or determine how well a person's diabetes is being controlled following diagnosis.

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Daysy Fertility Tracker

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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.

Future Healthy: Keeping the early retirement "FIRE" burning through your HSA

In the past, retirement was less of a question mark. If you worked hard and stayed with a company for the majority of your career, you could generally count on consistent raises and a pension at the end of the road. In many cases, smart investments and a frugal lifestyle would allow you to retire early.

Unfortunately, those days seem to be long gone. Anyone looking to retire early today needs more than just a great work ethic. They need to be proactive in managing their finances, willing to sacrifice, and motivated to increase their income. That ethos has spawned a community, referred to as FIRE (Financial Independence and Early Retirement).

If retiring early is a goal of yours, an HSA can be an invaluable tool. Here's how:

Why FIRE fans should consider an HSA

An HSA is quite nearly a perfect retirement vehicle. You can deduct HSA contributions on your taxes, withdraw the money tax-free and keep the money in your HSA until your last days.

Anyone eligible for an HSA can contribute up to $3,500 a year if participating in the health plan as an individual and $7,000 a year if participating as family. That's slightly less than the IRA contribution limit for individuals, but it's still a sizable sum.

HSAs also have generous growth potential, and can be carried in perpetuity, so you can use the money whenever you want - as long as it's for qualified medical expenses. If you start contributing to an HSA in your 20s, you can use the funds for knee surgery or any other procedures you might need in your 60s.

Someone who wants to retire at 45 will need to buy their own health insurance in middle age, and healthcare premiums increase as you get older. Because most early retirement devotees retire while not being eligible for Medicare, they have to buy it off the Marketplace or through a health care ministry.

That means they're paying high premiums while waiting for Medicare to kick in. To bridge the gap between early retirement and Medicare, early retirees should look into opening an HSA while they're young.

Think of an HSA like a retirement account for your medical bills. People who retire early will face higher premiums and deductibles, especially compared to the employer-sponsored health insurance they've probably grown accustomed to. With an HSA, they'll have a reliable source of money to cover their health care expenses until Medicare.

You can even continue using an HSA once you have Medicare. If you're 65 and older, you can use an HSA on any expense without paying the 20% penalty. If you're 65 and have Medicare, you can use the HSA on Medicare premiums.

If you invest money in an HSA for 20 years without ever withdrawing from it, you'll have even more money for your healthcare needs. Fund selection can be smaller with an HSA, but you can definitely find suitable options for any age or risk tolerance.

If you've maxed out your IRA and 401(k), maxing out your HSA should be the next step in your early retirement plan. And in our experience, only after you've maxed out an HSA should you move on to taxable brokerage accounts. But of course, we're not experts -- to get the best advice for your situation, be sure to speak to a licensed financial professional.

Home medical

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3M Littmann Lightweight II S.E. Stethoscope

Reliable acoustic performance for taking blood pressure readings.


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Whether it's for covering medical expenses, or planning bigger investments, our Future Healthy column will help support your path to retirement, no matter where you are on the journey. And for the latest info about your health and financial wellness, be sure to check out our HSA Learning Center, and follow us on Facebook and Twitter.


Accounts

Future Healthy: Why aren't more people saving their HSA funds?

Despite all of the articles on saving and investing HSAs in our Learning Center, most of the discussion surrounding HSAs has to do with spending. People are primarily concerned with how to access their funds, how to reimburse themselves for medical costs and what kinds of expenses are HSA-eligible. In fact, research shows that 96% of people spend the money in their HSA rather than saving it.

But HSA doesn't stand for health spending account. It's a powerful savings tool that can yield enormous benefits when used judiciously. Of course, you should use these funds whenever needed, but if you regularly empty your HSA account, read on to learn about alternatives that might benefit you more down the line.

Why you might want to spend HSA money...

When I opened my first HSA, my employer contributed $80 to it every month. The amount was enough to cover all of my medical bills for the year. I was only making $30,000 at the time, so every dollar was precious. If I had a surplus in my account, I would use the money to update my glasses prescription, get a few months ahead on my contacts or finally see my dermatologist. When I left that job, I only had $100 left in my HSA.

The reason why people spend all their HSA money is pretty straightforward - they just need it. If you currently have an HSA, it means you have a high-deductible plan with large out-of-pocket expenses. A simple office visit can cost $80, and extensive labs can run thousands of dollars. Many people can't afford to pay those fees without tapping into their HSA.

Why you might want to wait and save...

If you don't need to use your HSA for medical expenses right now, consider putting that money to good use. Customers who have more than the set investment threshold (which could be as much as $2,000 or more) in their HSA can invest the money in an ETF or mutual fund. That money will grow tax-free and any earnings can be used for qualified medical expenses.

An HSA invested in the stock market could see significant returns if properly diversified and left to compound for several decades. Savvy investors use an HSA as a bonus retirement account when they've already maxed out their IRAs and 401(k)s. The current annual contribution limit for HSAs is $3,450 for individuals and $6,900 for families.

Medical expenses tend to rise with age, which is another good reason to hold off on spending away your HSA funds if at all possible. As we age, health problems become more frequent and more severe, necessitating more doctor's visits, more prescriptions and more tests. A healthy 30 year-old will probably go to the doctor one or two times a year, but a senior citizen will probably need more frequent check-ups.

Achieving balance…

All this said, like many accounts, the trick for HSA success is achieving balance -- save when you can, spend when you need. Remember, these tax-free funds are there to promote long-term health.

As an example, other than for health insurance premiums, you can use your HSA for almost anything medical. Here's a brief list:

  • Prescription medications
  • Doctor's appointments
  • Labs
  • Surgery (excluding cosmetic surgery)
  • Chiropractors
  • Over-the-counter drugs with a prescription
  • Diabetes supplies
  • Vision expenses, including glasses and contacts
  • Hearing aids

If you're 65 or older you can withdraw money from an HSA for any reason without paying an extra penalty.

If you set aside more to cover everyday, out-of-pocket medical expenses -- the spending you'd do anyway -- then you'll increase your tax benefits, and be able to make the most of your funds. By achieving this balance, saving more to spend on things you need, the more you'll save in the long term!

Eye care needs

Opti-Free RepleniSH Multi-Purpose Disinfection Solution

Proprietary TearGlyde™ reconditioning system.

Caring Mill Contact Lens Case -- 2 Pack

Store soft or rigid gas permeable contact lenses.


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Whether it's for covering medical expenses, or planning bigger investments, our Future Healthy column will help support your path to retirement, no matter where you are on the journey. And for the latest info about your health and financial wellness, be sure to check out our HSA Learning Center, and follow us on Facebook and Twitter.

Accounts

Wage Up! Way too common open enrollment mistakes

Insurance is a complicated topic, full of details, loopholes and fine print that can come back to bite even the most savvy consumer. That's why open enrollment can be a stressful time for so many people.

While it may be impossible to avoid every little snag and pitfall that comes with trying to pick the right healthcare plan, you can at least steer clear of the most common mistakes. Here are some blunders people tend to make during this year's open enrollment (which is closer than you think!) ... from someone who's made more than a few.

Not considering an HSA-eligible HDHP

A few months ago, my husband and I moved from Colorado to Indiana. We're self-employed, so we bought our health insurance through the Marketplace. After arriving in Indiana, we had to purchase insurance again in our new state.

While looking through the various health care options, I found myself stuck between two similar-looking plans. One had the words "HSA" in its name, the other didn't. They were both high-deductible plans, so I assumed both were HSA-eligible.

I finally decided on the plan without "HSA" in the name and started the signup process. I got embarrassingly far into the process before I realized what should have been obvious - the "HSA" designation was meant to highlight whether or not a plan was eligible for use with an HSA. The plan I was signing up for wasn't.

Not every high-deductible insurance plan allows users to open HSAs. If signing up for an HSA-eligible plan is important to you, learn from my almost-mistake and verify that your HDHP qualifies.

Choosing services you don't need

All of us want good health care. We want to know that if something happens, we'll be taken care of. Sometimes that attitude leads us to sign up for more health care than we actually need.

If you've always purchased a gold-level plan and are in good health, consider dialing it back this year and going with a high-deductible plan. Not only will you save on your monthly premiums, you'll also get the benefit of contributing to a tax-deductible HSA. This decision could save you thousands of dollars in just one year.

Choosing an FSA-eligible plan, but contributing the wrong amount

Still not sure about moving to an HDHP but want similar tax-free spending benefits? Maybe a more traditional health plan with an FSA is better for your upcoming year. But even if you consider yourself a spending guru, some experts still struggle to predict the right amount to contribute.

FSAs require you to choose your contribution amount during open enrollment. The amount will be taken out of your paycheck and deposited directly to your FSA. You can only change your FSA contribution amount if you have a qualifying event like marriage, divorce, change in employment status or having a child.

It doesn't matter if you funded your FSA because you were planning an expensive procedure that subsequently gets cancelled. With limited exceptions, FSA funds may be subject to "use it or lose it", meaning you'll need to spend your full election or risk losing your hard-earned dollars (good thing we have thousands of eligible items for you to use your remaining funds on).

HSAs, by comparison, don't have these restrictions. Something to consider if you're given the option. This is why it's always important to accurately estimate how much you might spend on health expenses before signing up for a tax-free plan.

Eligible best-sellers

Baby Care Bundle

Everything you need for your little one.

Caring Mill Back to School Bundle

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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.

Eligibility

Wage Up! Non-traditional treatments - a worthwhile use of HSA funds?

Alternative medicine made a huge impact in the last few years, and continues to take an effect through 2019. From homeopathic treatments to alkaline diets, people are questioning commonly held wisdom more, and seeking their own path to wellness.

But as popular as these treatments are, they're less popular with insurance providers. Getting something like massage, acupuncture or chiropractic covered under your plan is a long shot, so you'll want to look into using your HSA.

Here's a little more about some things to know about non-traditional treatments and HSA eligibility.

Massage

HSAs only cover massage therapists if they're deemed medically necessary by your doctor. If a physical therapist recommends massage for a lingering injury, then you can pay for it with an HSA. If you decide that you'd like a massage to help you feel more relaxed, you won't be able to reimburse yourself with an HSA.

In order to use your HSA for your massage you should ask your doctor to write you a letter of medical necessity, which you can then use to file a claim with your HSA provider (or keep on file in the event you were ever audited by the IRS). The letter should detail the existence of a medical condition that can be treated with massage, among other requirements.

Acupuncture

Acupuncture is an ancient form of Chinese medicine that has been found to alleviate all sorts of pain and discomfort, including nausea related to chemotherapy and migraines. As with most treatments, you'll need to prove you need it for the diagnosis, cure, mitigation, prevention or treatment of a disease or illness for it to be HSA-eligible.

If a doctor recommends acupuncture as a treatment, you might be able to use your HSA to pay for it. This is another example where it might be a good idea to have your doctor fill out a letter of medical necessity, detailing how many acupuncture sessions you'll need and why they will help. If you use acupuncture for overall wellness, it won't be eligible to use with your HSA.

Chiropractor treatments

Like massage, many people find significant benefit in seeing a chiropractor for back pain. If you have chronic pain or a high school injury that flares up every now and then, a chiropractor can adjust your musculoskeletal structure.

Many chiropractic visits will not require a letter of medical necessity, but if you have any doubts be sure to get one to keep on file. Like other alternative forms of medicine, you can only get chiropractor visits reimbursed if you're using them for a specific reason.

Essential oils

Essential oils have recently become a popular home remedy, purporting to cure everything from stress to allergies - but the IRS isn't so easily convinced. Essential oils and aromatherapy are not eligible for reimbursement with an HSA. Even if a doctor agrees to write a letter of medical necessity for your essential oils, you likely still can't use your HSA card to pay for them.

How to pay for non-traditional treatments with your HSA

You can pay directly with your HSA card at the chiropractor or acupuncture office, or submit a claim to your HSA at a later time. Be sure to have your letter of medical necessity in case the HSA provider asks for one or just to keep on file in the event that you are ever audited by the IRS.

Alternative medicine is still a grey area for HSAs, so don't be surprised if your provider is unfamiliar with certain procedures. But a few minutes with your HSA administrator will probably clear any confusion, so you can start your journey with full understanding of how far your HSA funds can take you.

Alternative favorites

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Reduce pain throughout the body.


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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.

Basics

Future Healthy: HSAs and medical emergencies

Part of being human is the belief that we're invincible - right up until something breaks. Even in old age, it just never seems likely that we'll experience a medical emergency. But as likely or unlikely as that might be, everyone can benefit from putting more aside for their health.

Be proactive with your debts

If you get stuck with thousands of dollars in medical bills after a few nights in the ER, don't panic when you see the amount you owe. After submitting the claim to your insurance, you can negotiate the bill with the hospital. Medical institutions are generally pretty amenable to haggling on out-of-pocket expenses, so there's no harm in trying.

Provide a few reasons why you believe you deserve a lower rate, or, at the very least, you can ask for a more manageable payment plan. They'll likely compromise and offer a more forgiving pay structure than push you into bankruptcy. In the first scenario they get a large portion of the money they're owed - in the second scenario they get nothing.

Let's say you have an emergency appendectomy which costs $3,000 after your insurance has paid their portion. You request financial assistance, and the hospital drops the bill to $2,000, which they let you pay in $50 monthly installments.

Instead of paying $50 to the hospital from your bank account or credit card, use your HSA to make those payments. You'll be eligible to take a tax deduction because of those HSA contributions, which will lower how much you'll owe in taxes.

If you can afford to pay that $2,000 all at once, you should still utilize the tax benefits of your HSA. Make a $2,000 transfer from your bank account to your HSA and use the latter to pay the bill.

Sometimes, you need to be a little crafty

Let's look at another scenario: You break your leg hiking and go to the hospital, where you get an x-ray and see an orthopedic specialist.

The bill is $50,000, and your part after insurance is $6,000. Fortunately, you have a $6,000 emergency fund put aside in a savings account. You plan to transfer the money to your HSA in order to get the tax break. But there's a snag -- the 2019 maximum annual contribution for an HSA is only $3,500. If you transfer the full $6,000, you'll pay a 6% tax on the extra money.

Here's what you can do instead:

  • Set up a payment plan with the hospital and try to extend your payment window as long as possible.
  • Transfer $3,500 to your HSA for this calendar year and use it to pay your monthly hospital bill.
  • As soon as the new year hits, the clock resets on your HSA contributions and you can transfer the remaining amount to your HSA. By extending the payments to cover two years, you reap the full tax rewards that come with an HSA.

The best way to pay for medical emergencies with an HSA is to contribute a set amount each month. Doing so consistently will leave you with a nice safety net for the next time something unexpected happens.

Emergency necessities

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Whether it's for covering medical expenses, or planning bigger investments, our Future Healthy column will help support your path to retirement, no matter where you are on the journey. And for the latest info about your health and financial wellness, be sure to check out our HSA Learning Center, and follow us on Facebook and Twitter.

Eligibility

Wage Up! Using your FSA or HSA for DNA tests

Just a few short years ago, gene testing was seen as a brave new world for preventive medicine. When Angelina Jolie went public with her BRCA1 mutation diagnosis and subsequent double mastectomy in 2013, few people had heard of BRCA gene mutations. Many weren't even aware genetic testing could be used to inform medical decisions.

Since then, the DNA testing landscape has exploded. Companies like 23andMe, Color and Helix offer kits that can give you a clearer picture of your genetic health - specifically conditions and diseases to which you may be more susceptible.

But because the DNA testing industry is relatively new in the medical world, using your FSA or HSA to pay for a test isn't as straight forward as it would be to pay for most other medical expenses. Here's what you need to know.

Will your FSA/HSA cover DNA tests?

In general, you can get genetic testing from your doctor's office or from one of the many genetic testing services available, such as 23andMe. Few doctors recommend genetic testing unless you're starting a family or have a strong family history of a certain disease. In that case, they'll refer you to a lab for further bloodwork.

Since the advent of at-home DNA tests, more people have been eager to find out what conditions they're genetically at risk for, including Parkinson's, Alzheimer's, Celiac and more. Most of these tests only require a saliva sample, cost between $100 and $300, and provide results within a few weeks.

Getting reimbursed for these tests through your FSA or HSA isn't easy. These accounts only cover genetic testing when you have a Letter of Medical Necessity (LMN), which administrators require to prove that the DNA test is being used for medical reasons. Your doctor or other health care professional will need to write this letter to prove that the test is for the diagnosis, cure, mitigation, treatment, or prevention of disease.

The test might have a medical purpose as its primary goal, but a DNA test might also reveal non-medical information - such as ancestry or ethnicity - so it doesn't always have a medical use. If you order a DNA test that also provides information on your family's ethnic background, you might find it harder to get the expense approved.

If the user doesn't have a family history of a specific disease, it might be difficult to get the doctor to write an LMN for you.

If you're unsure as whether or not the DNA testing will be eligible, and what types of documentation may be required, be sure to check with your FSA administrator.

If I can't get an LMN, what's next?

A popular genetic test that's covered by HSAs and FSAs without an LMN is the BRACAnalysis test, which determines if the user has a mutation on the BRCA1 or BRCA2 gene. A pathogenic mutation on one of these two genes means the patient has a high chance of developing breast and ovarian cancer.

Upon testing positive, many women undergo preventative surgeries of their ovaries, Fallopian tubes and breasts to lessen the cancer risk. Because the BRACAnalysis test is shown to be medically necessary and only tests patients for a specific disease, it will typically be covered by your FSA or HSA without an LMN.

If you do test positive for a medically relevant gene mutation, an appointment with a genetic counselor may be covered by your FSA or HSA. Follow-up appointments with your primary care doctor or specialist will also be covered.

At-home testing

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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.