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!

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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.

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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.

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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.

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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.

Eligibility

Wage Up! Dermatology services covered by your HSA

Most of us rarely see a dermatologist unless we have a particularly nasty-looking fungus or a rash that won't go away. Otherwise, we suffer in silence and go to a primary care doctor when something is awry.

But seeing a dermatologist is a good idea - and you can use your HSA account to pay for those visits. Some dermatology services are considered cosmetic fixes, so they aren't covered by your HSA. Knowing what's covered at the dermatologist's is important. You don't want to spend hundreds of dollars only to find out you won't be getting an HSA reimbursement. Here's what you should know about seeing the skin doctor and using your HSA.

Skin cancer screenings

We first discussed skin cancer prevention a few weeks ago, but it's always worth mentioning again. If you have a family history of skin cancer or spend a lot of time outside, you probably should see a dermatologist once a year for a routine skin check. That's when a doctor will look over your skin and see if any moles or bumps need your attention, whether it's to be removed or just watched a little more closely.

Because skin checks are not considered to be preventative care under the Affordable Care Act, you have to pay for them out of pocket after filing with insurance. But we can't think of many better reasons to use your HSA funds than to cover these necessary checkups.

Prescriptions

Dermatological conditions such as psoriasis, eczema and rosacea often require prescription-strength creams and gels. These medications can be costly and are sometimes not completely covered by insurance. No matter how much they cost, your HSA funds can help.

Note that this only works for prescriptions. Over-the-counter medicines aren't considered qualified expenses unless your dermatologist writes out a prescription for them. If you believe a drugstore lotion helps your dermatitis and you want to pay for it with your HSA, tell your doctor and they might be willing to write a prescription for it.

Acne treatment

If you visit a dermatologist because of acne problems, the appointment is HSA-eligible. Any prescriptions you get to help your acne are also covered. This may be confusing to patients who view acne as a "cosmetic issue," such as wrinkles or dark spots, which aren't covered by your HSA. But acne is considered a medical condition.

Like other drugs, over-the-counter acne treatments containing an active medical ingredient aren't HSA-eligible unless the doctor gives you a prescription for them. You'd be surprised to know that are some acne fighting light devices that won't require a prescription an all. But if you claim an OTC drug like Differin on your HSA, keep your doctor's prescription on file in case the IRS needs more verification.

Hair and nail issues

Dermatologists don't just fix skin ailments, they also deal with problems related to hair and nails. If you have severe dandruff or persistent nail concerns, you can visit your local dermatologist. And you should -- some diseases, like anemia or thyroid disorders, will first manifest in the nails before showing up in the rest of the body.

If you notice something unusual with your hair or nails, your HSA can help pay for that visit. Any prescription they give you, like a medicated shampoo, can also be paid for with an HSA card (just keep your prescription on file in case you ever need to verify the expense)..

How to get dermatology services covered by your HSA

Even though a condition might not seem like a skin-deep problem, you might have to get your dermatologist to write a Letter of Medical Necessity to your HSA provider. This letter should dictate why your condition is a medical problem, not just a cosmetic one.

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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.

Living Well

Compound It! How HSAs can benefit single moms

It's one of the first signs of spring and the first sign that school is almost out and that summer is on its way: Mother's Day.

Every year, Mother's Day cards say the same thing: how amazing, selfless and nurturing mothers are. And rightfully so - mothers give so much of themselves to raise, protect and help their children fulfill their dreams.

But being a mother is no easy feat and not something that can be summed up in a Hallmark card. It's a trying job, even more difficult if you're doing it on your own. Single mothers make up 25% of all American families and they need and deserve special consideration.

Why an HSA can help

If you have a high-deductible health insurance plan (HDHP), you're eligible for a health savings account or HSA. Contributions to an HSA are tax-deductible so every dollar you contribute will reduce your taxable income.

HSA withdrawals are also tax-free if you use them for qualified medical expenses, which include doctor's visits, prescriptions, lab work and other services and procedures. Earnings from your HSA also aren't taxed.

You can open an HSA by yourself, but your employer may also provide an HSA. Some even contribute money to your HSA as a way to encourage employees to choose qualified HDHPs.

You can pay for your own medical expenses and your child's with an HSA if you claim that child as a dependent on your taxes. If you and the other parent take turns claiming the child as a dependent, you won't be able to pay their medical expenses from your HSA if you're not claiming them that year.

However, your child doesn't have to be under your own health insurance plan. If your child has insurance through Medicaid or their other parent's health insurance, you can still pay their medical expenses with your HSA if they're otherwise eligible.

Your child has to be under your insurance plan if you want to contribute the family limit to your HSA (that's $7,000 in 2019). If your child is on a separate plan and you participate in the health plan on your own, you may only contribute the individual maximum of $3,500.

Open a DCFSA to extend the benefits

If you have an HSA, you can also open a dependent care flexible spending account (DCFSA), which works like a savings account specifically for qualified childcare expenses. You can contribute a $5,000 max amount to your DCFSA every year if you are married and file a joint or single tax return and $2,500 if you're married but filing separately.

You can use funds in a DCFSA to pay for babysitters, nannies, camp, aftercare and related expenses that allow you and your spouse to work or go to school full-time. This is only available for children below the age of 13 or adults who are your tax dependents and who live with you and physically rely on your care.

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Compound It! is your 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.

Retirement

Future Healthy: Funding your HSA over other retirement plans

Investing is about starting early and contributing often. Due to the magic of compound interest, a small amount invested today can end up being more valuable than a larger amount invested ten years from now.

But making the most of your contributions is about investing smartly. You need to prioritize where your hard-earned money goes, so you can maximize the earning potential of your portfolio. If investing is like planting an orchard in the hopes of one day collecting apples, investing smartly is like choosing the most fertile soil.

Of course, we're not financial pros, so be sure to consult with a licensed professional before making any decisions about your own finances. But based on our own experiences, here's where we think HSA contributions fit into the mix.

Figure out your priorities

When it comes to investing, there's only one thing you absolutely need to prioritize over starting an HSA: take advantage of any matching contributions in your 401(k). If your employer has a sponsored retirement plan, you should contribute enough to get the match. If they match 100% up to 5% of your salary, you should consider contributing 5% of your salary before starting an HSA.

Matching contributions are free money you can't get back. No matter how enticing an HSA is, you should probably get the matching money first.

Why you should prioritize HSA contributions

When choosing a dedicated retirement plan, you usually have to pick between a Roth IRA or traditional account. A Roth account allows users to withdraw money tax-free in retirement, while a traditional account lets investors deduct contributions on their taxes.

Deciding between a Roth and traditional account can be a complicated decision, but that's where an HSA comes in. An HSA combines the two best elements of a Roth and traditional retirement account.

Contributions to an HSA are tax-deductible, no matter your income bracket. Withdrawals are tax-free, and you don't have to wait until a certain age to take money out of an HSA.

This latter benefit is especially valuable for those who retire before they're eligible for Medicare. Healthcare costs can be extremely expensive for early retirees, so having money in an HSA will offset those costs.

You can also invest funds in your HSA just like you would invest an IRA or 401(k). You can pick from a variety of HSA providers, many of whom have low trading fees and a large list of investments. Earnings from those investments will also grow tax-free.

After you turn 65, you can use funds in an HSA for any purpose. You'll just pay income tax based on your bracket, similar to a traditional retirement account.

One notable downside

When you have an IRA or 401k, you can withdraw the money in retirement for any purpose. You can use it to pay for a vacation, donate to charity or splurge on presents for your grandkids.

Money in an HSA can only be used for qualified medical expenses. Even the earnings that come from investing your HSA should still be used for those IRS-sanctioned expenses. That's the only downside to prioritizing your HSA over other retirement accounts, although your medical expenses in retirement will likely be significant enough to justify a well-stocked HSA.

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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
Photo by Esther Tuttle on Unsplash

Compound It! What new college graduates should know about health insurance

Graduating from college is an exciting experience. It's the one of the first times one feels like a real adult. No longer are they living within the shadow of their parents, or under the watchful eye of their university. Now, they can make their own decisions.

And choosing a healthcare plan is a big one. Picking a health insurance option can be overwhelming and complicated without the right information, especially if their parents have always taken control of their medical expenses. Well, we have that info. Here are a few things new grads need to look for so they don't start off adulthood on the wrong foot.

Look beyond the premiums

When you're examining your healthcare options, the first number you'll notice is the premium or the monthly payment. The premium is what you pay for having health insurance, but it's just the starting figure. Here's what else you should look at:

  • Copay: This is how much you'll pay upfront when you visit the doctor's office.
  • Coinsurance: This number shows what percentage of the bill will be your responsibility. This will be charged instead of or in addition to the copay.
  • Deductible: The deductible is how much you'll pay by yourself before insurance kicks in 100%. You could have a deductible and a copay or coinsurance post-deductible.
  • Out-of-pocket max: The out-of-pocket max is the most you'll pay in one year.

Grads also need to know how to pick the right doctor or hospital ahead of time. Every insurance plan comes with its own list of acceptable doctors and not every physician will be in the network. Some insurance plans, like HMOs, don't even cover out-of-network visits. That can turn a $50 appointment into a $500 burden.

Consider a high-deductible health plan

For most college graduates, this will be the first time they've had to pick a health care plan, previously relying on their parents. In the sea of health insurance jargon, it may be tempting to pick the cheapest plan. Fortunately, that's often the best choice.

Recent grads are mostly healthy which means they don't need an insurance plan that costs more than their student loans. To save the most money, they should consider a high-deductible insurance plan which will have the lowest premiums.

Because a 22-year old likely doesn't have the arthritis or blood pressure issues that a 50-year old does, they can afford to sign up for the cheaper plan. When they need to visit a doctor, they'll pay more, but the cost will even out over the course of a year.

A high-deductible plan also lets them contribute money to a health savings account (HSA). Contributions to an HSA are tax-deductible which will reduce how much they owe in taxes. Plus, HSA funds roll over from year to year, making it a rainy day fund for health problems.

This strategy only works if you're truly healthy. If you have a chronic health condition, like type 1 diabetes, you should probably go with a low-deductible plan.

Don't avoid picking one

It's easy to get overwhelmed when surrounded by pamphlets and employee handbooks. But don't procrastinate. Open enrollment for healthcare only lasts for a couple months after which it's too late to pick a plan. Plus, under the Affordable Care Act, you'll pay a steep penalty if you don't have health insurance. Talk to your HR rep if you're confused about your options.

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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
Photo by Robbie Weaver on Unsplash

Compound It! Using your HSA for caregiving

As the Baby Boomer population continues to age, many of them are having to rethink their living situations. Some are transitioning to senior living centers, some are choosing retirement communities, and others are renovating their homes to be more suited for their needs.

But another subset of the population is leaning toward another option: moving in with their children. For adult children, taking care of their parents can be extremely fulfilling, especially if they're in their later years.

Fortunately, caregiving can be extremely financially rewarding too, with little-known tricks that people can take advantage of. Read on to see how an HSA can be used to save and prepare for caregiving expenses, now or in the future.

First, the basics

There are several rules and limitations regarding using an HSA for caregiving, which must be followed to the letter. First, your parent must be your dependent, per the definition set by the IRS.

To be eligible for dependency status, the parent must be a resident or citizen of the U.S. or a resident of Canada or Mexico. They must be your biological or adopted parent. Foster parents are not eligible to be claimed until they have lived as part of your household for at least one year.

If your parent lives with you full-time and you provide more than half of their financial support, then they may qualify as an official dependent that you can claim on your taxes. Your parent has to report that they're a dependent when they file their own taxes. Your parent also cannot have more than of $4,050 in gross income, which fortunately excludes Social Security benefits.

Just like other HSA rules, you can only spend HSA funds on qualified medical expenses. For example, if your mother gets prescribed a medication that's not completely covered by Medicare, you can pay for it out of your HSA (provided your mother is a qualified dependent as discussed above). If their doctor recommends home health products, you can buy them with HSA money, too.

You can't spend HSA money on non-qualified expenses, even if they relate to your dependent parent. Anything you purchase with your HSA card still has to fall under HSA eligibility guidelines; you can find a list of some eligible items here.

The tax benefits of caregiving

If you've previously been paying for your dependent mother's diabetes medication out of pocket, you'll find a nice tax bump once you start using your HSA.

The best way to save on your taxes if you're taking care of your qualified dependent parent is to contribute the maximum to your HSA. Currently, the limit is $3,450 a year for those participating in the health plan as an individual and $6,900 a year for those participating in the health plan as family. If you're 55 and older, you can contribute an extra $1,000 annually.

Remember, you still need to have a high deductible health plan (HDHP) to use an HSA. You can't open one just to take advantage of caregiving expenses if you don't have an eligible health insurance plan. Currently, the requirement for an HSA-qualifying plan is a deductible between $1,350 and $6,650 for individuals and between $2,700 and $13,300 for families.

Before you sign up for an HDHP, do the math to make sure you won't pay more out of pocket. It's not worth saving $200 on your taxes if you'll spend thousands more overall.

If your parent is on Medicare, they can't open their own HSA plan. The same eligibility rules that apply to all HSA participants apply to them. If they have a previous HSA that still has money in it, encourage them to spend that down before using your own funds.

Caregiving needs

Drive Duet Rollator/Transport Chair

Combines the features of a Rollator and transport chair in one unit.

Medline Adjustable Quad Cane

Provides increased durability with a handle that offers great stability.


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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.

Eligibility

Wage Up: How athletes can benefit from an HSA

Athletes are no strangers to the medical world. They frequently get injured and usually have a doctor on speed dial. They know the difference between a serious injury and something that'll go away with ice and rest.

But many of them aren't aware that they can use an HSA to save money on doctor's visits, sports injury supplies and more. Having an HSA can help them save on their taxes while ensuring they've always got money stashed away in case of an ACL tear or sprained ankle.

Doctor's visits

Tweaked your knee training for the marathon? Use your HSA to pay for a visit to a physical therapist or sports medicine doctor. Any medical professional you visit is eligible under your HSA (provided that the service you receive is eligible as well). You can also use your HSA for specific travel expenses such as reimbursement of medical mileage related to a doctor's visit, especially useful if you're visiting a specialist whose office is 45 minutes away.

If you need extensive surgery or rehab after a sports injury, consider maxing out your HSA. Currently, the annual contribution limit is $3,450 for individuals and $6,900 for families. Paying for ACL repair surgery with your HSA will take the sting out of the operation, since you'll get a nice tax deduction at the end of the year. If you frequently get injured, think about contributing a set amount each month to your HSA so you're always prepared.

Massage and acupuncture

If your doctor recommends massage or acupuncture for a lingering injury, you may be able to use your HSA to pay for it (unfortunately massages just for relaxation won't qualify). The doctor must write out a plan of care that includes massage or acupuncture, and they need to highlight why it will help.

Chiropractor visits also fall under HSA rules. In both cases, you'll want to hold onto these doctors notes just in case it's needed to prove the expense was indeed eligible.

Supplies

Athletes who train frequently go through a lot of supplies, many of which are qualified medical expenses. If you need sports tape, ibuprofen (Rx required) or an ice pack to relieve your latest injury, visit HSAstore.com. Common sports-related purchases that are also eligible for HSA reimbursement include braces, straps, crutches and compression socks.

Sports psychology

If you're suffering from burnout or performance anxiety, a visit to a sports psychologist can clear your head. Fortunately, mental health is covered by HSAs. You can see a psychologist, psychiatrist or licensed clinical social worker. Any anxiety or depression medication recommended by the physician will also fall under your HSA's purview.

How to get expenses reimbursed

You can use your HSA debit card directly to pay for qualified medical expenses or you can use another account and reimburse yourself later. Remember to keep all relevant receipts in case the IRS asks you to prove those expenses were HSA-eligible.

You might even want to scan them digitally since many paper receipts will age quickly and become illegible. Store receipts on a secured cloud server, so you can always find them easily. Your doctors will also usually keep copies of records, though you shouldn't rely on them exclusively.

What you can't use an HSA for

Unfortunately, not every athletic endeavor can be paid for with an HSA. Gym memberships, protein powders, nutritional supplements and private trainers are almost always off-limits, unless your doctor or medical professional has specifically prescribed them to fix a medical condition.

Athletic essentials

KT TAPE Original, Pre-cut

Provides targeted pain relief and will stay in place for days.

Kanjo Memory acuPressure Mat Set with Pillow

A simple yet effective at-home solution for neck and back pain.


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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! Is it allergies or acid reflux?

For most of my 20s, my husband assumed he had allergies. He woke up almost every morning with a stuffy nose and mucus running down the back of my throat, and no amount of allergy medication seemed to make a difference. Eventually, he was referred to an ENT for a closer look.

As it turns out, he didn't have allergies. What he actually had is a particular type of acid reflux with symptoms almost identical to allergies. After experimenting with some dietary supplements and making a few lifestyle changes, his symptoms have almost completely disappeared.

Of course, we're not doctors, and aren't providing medical advice, just our own stories. Always see a physician to get the right medical advice for your needs. But if you have stubborn allergies that never seem to get better, read ahead to see how we learned that these symptoms were actually acid reflux - and how we paid for treatment with our HSA.

Why acid reflux sometimes looks like allergies

There are multiple types of acid reflux, with the most common symptoms being heartburn, acid in the back of your throat, stomach pain and bloating.

But one type of acid reflux, known as silent reflux or Laryngopharyngeal reflux (LPR), has a much different - and often confusing - set of symptoms. These include post-nasal drip, excess mucus and a sore throat. If that sounds a lot like seasonal allergies or hay fever, you'll understand why so many people misdiagnose themselves.

One key difference between allergies and acid reflux is that the latter won't cause sneezing, itchy eyes or a runny nose. If you're experiencing symptoms and aren't sure whether you have allergies or LPR, make an appointment with your primary care doctor to get an accurate diagnosis.

How to use your HSA to douse those acid reflux flames

You can use your HSA funds to pay for a doctor's appointment and any tests they may order. Some doctors may order an endoscopy to determine the amount of esophageal damage that's been done. Others may refer you to a gastroenterologist.

Much of the time, silent reflux can be alleviated by avoiding food right before bed, limiting alcohol and chocolate, sleeping with an elevated torso and eating smaller meals.

You can buy a wedge pillow to prop your head up at night. Having your head higher than your throat will prevent acid from backing up into your throat.

Unfortunately, those strategies aren't always enough. A doctor may suggest taking an antacid after eating to prevent any problems. Your HSA provider will only cover over-the-counter medications if a doctor writes a prescription for them.

If your doctor tells you to take an antacid without writing a script for it, you can't pay for it with an HSA. But if you get a prescription for anything your doctor recommends and keep a copy for your HSA records.

If antacids aren't strong enough, a physician may prescribe a proton pump inhibitor (PPI) such as Prilosec. Your HSA may be used for any prescription medication your doctor orders.

Patients who develop serious symptoms but aren't able to take medication may benefit from surgery to strengthen the esophagus and prevent more damage from occurring. This only happens in rare cases if medication and lifestyle changes don't fix the LPR.

Eligible heartburn relief

MedCline Advanced Positioning Wedge for Acid Reflux

Validated in 5 independent clinical trials.

MedCline Acid Reflux Relief System, Large

The most effective treatment for heartburn.


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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.