Everything You Need to Know about Health Savings Accounts


In the last blog, you learned the benefits of a group health insurance policy as an investment to help your business grow successfully. This time, let’s explore the addition of Health Savings Accounts for your employees. Health Savings Accounts (HSA) give your team members the opportunity to save money and pay for health care expenses as they arise. For your employees to take advantage of a HSA, you must enroll in a High Deductible Health Plan (HDHP). As you know, these plans have low monthly premiums with high deductibles and are often used to cover the expenses that come with serious injuries or long-term illnesses. 

To open an HSA, employees must be enrolled in the HDHP at the first of the month. Health Savings Account enrollment is not available for those enrolled in a non-HDHP or Medicare. Health Savings Accounts offer a number of advantages for you and your employees.

First, every employee enrolled in a HDHP can contribute to a HSA including you as the employer. This can add up to you, the employer, saving thousands of dollars monthly, and, in turn, passing some of these savings onto your employees as they contribute to their Health Savings Account. In addition, HSAs offer you and your employees the benefit of better managing health care costs.  

Health Savings Accounts allow pre-tax and tax-deductible contributions, a huge advantage as contributions are made with pre-tax dollars, which means your employees never pay federal and, in some cases, state taxes. The pre-tax contributions are not included in your employee’s gross income. Once you make the contributions to your employees’ HSA, they are fully tax deductible after meeting IRS guidelines.

In addition, withdrawals for qualified medical expenses are tax free, including withdrawals for Band-Aids, Birth Control, Acupuncture, Eye Glasses, Contact Lenses, Pregnancy Tests, Weight Loss Programs, and even Wigs. 

An added bonus with the addition of Health Savings Accounts in your business, is contributed funds can roll over from year to year until the employees retire. The money deposited in an employee’s HSA belongs the employee even if they change employers, health insurance policies, health care providers or retire.

Health Savings Accounts are on the rise as a portion of many families’ retirement planning, as people live longer. As health care costs rise, couples retiring may need $250,000 more than previously estimated just to handle out of pocket costs Medicare doesn’t cover. If retiree health care costs continue to rise six percent annually, as they have since 2002, a Health Savings Account is a smart addition to an employer’s benefit package.

Like offering Group Health Insurance in your business, Health Savings Accounts are a great benefit for both you and your employees. Next time, we’ll share more ways to save by properly structuring your company’s health insurance plan as we discuss “Fully-Funded Versus Self-Funded – Which is Best for Your Business?”

blogJerome Frederick