What is a Health Savings Account (HSA)?

*2021 HSA Limits Rise Modestly, IRS Announced

On May 21, the IRS announced that Health Savings Account (HSA) contribution limits for 2021 are going up $50 for self-only coverage and $100 for family coverage, giving employers that sponsor high-deductible health plans (HDHPs) plenty of time to prepare for the open enrollment season later this year. The annual limit on HSA contributions will be $3,600 for self-only and $7,200 for family coverage. That’s about a 1.5% increase from this year. In Revenue Procedure 2020-32, the IRS confirmed HSA contribution limits effective for calendar year 2021, along with minimum deductible and maximum out-of-pocket expenses for the HDHPs with which HSAs are paired. 

What Benefits a HSA Does it Offer?

If you are browsing various health care coverage plans trying to find the best option for you, you will probably see some terms that you aren’t too familiar with. But, in order to choose the plan that best suits your lifestyle and needs, it’s essential to understand what each plan entails. One term you may be seeing throughout health care and insurance sites is “Health Savings Account,” or “HSA.” So, what is an HSA? And what are the benefits associated with having one? 

An HSA is a savings account with funds allocated specifically for health care expenses and eligible for certain tax advantages. HSA accounts are only available for high-deductible health insurance plans, including Nova Pathfinder Healthcare High Deductible Healthcare Plans. If you’re wondering whether such an account would be right for you and your family, consider the following Health Savings Account benefits. 

Not Subject to Taxation
woman wearing a grey sweater putting a hundred dollar bill in a pink piggy bank

Funds that you deposit into your HSA are deductible on your federal income taxes. Nothing is better than getting a bigger refund or paying a smaller amount to the IRS, and it’s ideal when this benefit accompanies the security offered by an HSA. Unlike other specialized savings accounts that impose tax penalties for withdrawals, you will not be taxed for taking funds out of your HSA—as long as the withdrawal is used to cover eligible medical expenses. Medical expenses are an inevitability, so stowing away funds in an HSA is a great way to minimize your tax bill while also planning for your health care. 

HSA Growth is Also Tax-Free

The interest rates on a Health Savings Accounts vary based on the institution with which you open it and the amount you initially deposit. Some accounts range in interest from .1 to .45% APY. The interest earnings of traditional savings accounts are subject to taxation if they surpass $10 a year, but HSA interest earnings are not. Like your initial deposit, the sum that you earn in interest will remain untaxed by the IRS. This is great news if you can deposit a substantial amount and find a bank that offers a high-interest rate on your funds. 

Avoid the Headache of Unexpected Expenses

Many people hope that they can survive without seeing a doctor and avoid health care emergencies, but there are a million ways that an unexpected medical expense can happen. Car accidents, physical injuries, and serious diagnoses don’t discriminate. They can happen to anybody, and if you haven’t planned for the possibility of one, such an event can be financially devastating. Some of the expenses you may incur if you haven’t properly planned include the following: 

  • Collection Fees
  • Interest on Account Balance
  • Late Penalties
  • Credit Card Interest
  • Cost of Time Off Work

A health savings account makes it simple to prevent the additional expenses associated with medical emergencies.

Wait to Use Funds as Long As Necessary

When people ask, “what is a health savings account?” they often have a number of questions beyond a simple definition. How long does it last? How is it taxed? When can I use it? An important feature of an HSA is the fact that you can keep funds in the account for as long as you’d like without penalty.

You do not need to have a minimum quota of activity in order to maintain the account, so you don’t need to use or withdraw the funds within a certain time period. This is good since medical emergencies are not planned—so you never know when you will need to use funds. It may be six months after establishing your account, but it may also be six years.

Reimburse Expenses Incurred After Establishment

Many HSA account holders may worry about the timeframe for medical expenses incurred. Some accounts only cover expenses that occur within a certain time period after establishment or enrollment, but with an HSA, any expenses that are incurred after establishment of your account are eligible for coverage.

This means that even if you have not claimed reimbursement for an expense a year after it occurred, so long as it happened after you established and funded your HSA, it may be eligible for coverage. There is no probationary or trial period that delays potential reimbursement from your account. This makes it simple to deal with any health care expenses that happen after the establishment of your account.

Maintain Savings Regardless of Insurance Status

With traditional insurance, one of the most stressful factors is the uncertainty of insurance coverage. Your policy could change at any moment, your premiums could go up, or it could be discontinued. Luckily, Nova Pathfinder Healthcare offers the benefits of an HSA without the constant worry that your costs will go up. Our premiums haven’t changed since 2014!

One of the best advantages of an HSA is the fact that it is not affected by changes like this. So long as your initial coverage is an eligible high deductible plan, any future changes in your coverage will not threaten your HSA savings. If you incur a medical expense while covered by a plan that would be HSA ineligible, it is still eligible for coverage because you established your HSA with an eligible plan.

Cover Dental and Vision Expenses, Too

Lastly, individuals who establish an HSA will be pleased to learn that dental and vision expenses are also eligible for reimbursement through their HSA. If you need to get new glasses or have a cavity filled, routine health care costs like these may not be covered by traditional insurance, but you can fund them through your HSA. Many health insurance policies do not extend vision and dental coverage, so an HSA provides a great way to ensure that these healthcare needs are met without the burden of paying them out of pocket.

With Nova Pathfinder Healthcare, you don’t have to worry about these expenses, ever. Along with an HSA, you also get coverage for holistic dental care. This includes initial and routine checkups, cleanings, comprehensive dental examinations, dental trans-illumination, thermography, panoramic X-ray and more!

Get the Benefits of an HSA with Nova Pathfinder Healthcare
Whether you’ve missed your open enrollment period or are looking for a healthcare coverage plan that better suits your lifestyle, signing up for Nova Pathfinder Healthcare is a simple and straightforward process.
Nova Pathfinder Healthcare is experiencing a temporary service outage for new members in the state of Idaho. For questions or to get a quote contact member services at 833-444-6682.