Situation: To maintain expense control as the Affordable Care Act is implemented, a company is looking at HSA options to replace their past insurance coverage. What do you think is the future of HSA policies and accounts as the ACA is implemented?
Advice from the CEOs:
- HSA Accounts are expected to survive implementation of the ACA, at least for now, and may even thrive (Forbes Magazine analysis, 3/27/13).
- The HSA Model combines a relatively inexpensive high deductible health insurance policy (minimum deductibles in 2013 at least $1,250 for individual and $2,500 for family coverage) with an HSA Account. Employer or employee contributions go into the account pre-tax. Most insurers offer a high deductible policy and many companies have adopted this option because it helps to control the growth in health care costs.
- Annual HSA contributions are limited to the amount of the deductible, currently up to $3,250 for individual and $6,450 for family coverage, though these amounts are increased by $1,000 of the employee is 55 or older. Contributions are held in a bank account and can be withdrawn by the employee to cover most out of pocket health expenses. This is under an honor system, subject to possible audit by the IRS.
- The key component that differentiates HSA Accounts from older health reserve accounts is that if the funds deposited annually are all not used to pay for health costs, the employee gets to keep the excess funds in the account. If the employee builds up excess funds in HSA Account, these can be transferred into an IRA. Check with your HSA bank for rules as to transfer of IRA funds back into the HSA Account if needed to cover out of pocket health care costs.
- The down-side of the HSA Account is that if the employee encounters a significant health cost, above the amount in their HSA Account, they will have to cover this out of pocket. However, they have the option to reimburse themselves from future HSA contributions as these accrue.
- If you are considering this for your company, it is advisable to hire a consultant to help you tailor the plan to the specific needs of your company.