Health Savings Accounts
A Health Savings Account (or HSA) looks and works like a typical checking account, in that, participants are issued a check book and a debit card. The account may be used for any qualified health expenses (like physician office visits, emergency room care, pharmacy - including many over-the-counter medications, dental procedures, etc.).
Following is a quick summary of the key features of HSAs:
- The employee owns the account and takes it with them should they change jobs
- Contributions, interest growth, and disbursements are non-taxable
- Balances roll over from year to year; no "use it or lose it" provision
- Both the employee and the employer may contribute to the account
Employers often choose to contribute to their employees' accounts. This is a great way to offer a generous employee benefit, while turning a portion of your variable costs into fixed costs. For example, many of our customers (employers) contribute 50% of the employees' monthly medical premiums. When they convert to a High Deductible Health Plan with a HSA, they invest a portion of their premium savings as a monthly contribution to each employee's HSA. The employer contribution can remain the same each year, and unlike medical premiums, is not subject to medical inflation. Hence, a portion of the employees' compensation becomes a fixed cost in the annual business budget.