The situation surrounding the coronavirus is ever-changing, but the impact it has on our daily lives cannot be ignored. Some of us may be adapting to working from home, homeschooling our children, recovering from a job loss, or fighting on the front lines. We’re all feeling the financial impacts of this health crisis, but health insurance doesn’t have to be one of them.
Coronavirus has taught us that planning for unexpected medical expenses is a must. A Health Savings Account, or HSA, is a great way to do so. An HSA is a triple tax-sheltered account that helps pay for certain medical expenses if you have a High Deductible Health Plan. HSA contributions are tax-deductible and certain withdrawals are tax-free. Similar to 401k(s), earnings on the account grow tax-free.
If your employer doesn’t offer an HSA, you can still open one at a bank, broker, or credit union if you are eligible. Eligibility may vary but you must only be enrolled in a High Deductible Health Plan (HDHP), and you cannot be enrolled in Medicare or claimed as a dependent on another person’s tax return. Some institutions may charge you to open an account or charge a fee that can be waived if you keep the minimum balance in the account. Howard Bank offers interest paid on all balance tiers with no opening minimum to open and no minimum balance.
A Health Savings Account is not to be confused with a Flexible Savings Account (FSA). While both are used for health costs, offered by employers, and funded with pre-tax contributions, Flexible Savings Accounts don’t allow you to roll over your money. With an HSA, your money stays with you and never expires. So, if you’ve been furloughed or laid off due to the pandemic, premiums for health care continuation coverage under COBRA are considered an eligible medical expense, therefore, can be paid using HSA funds. An HSA can also act as an additional retirement fund. HSA contributions can be invested in mutual funds or other investments. If you are fearful that market volatility may reduce your HSA funds, you can simply leave the funds in a tax-sheltered bank account.
Covid-19 has broadened the spectrum of qualified HSA expenses and reimbursements. For instance, under the CARES Act, you are now able to use your HSA funds for personal protective equipment (PPE), Covid-19 testing, or telehealth services. Also, over-the-counter products and medicines purchased without a prescription since January 1, 2020, are now eligible for reimbursement. This includes pain relievers for cold and flu-related symptoms, menstrual products, contact lenses and solution, thermometers, bandages, and batteries for medical devices.
Covid-19 has not only motivated people to open HSAs but to contribute more than they were previously. Doing so helps to ensure you’re better prepared for future health expenses, including during retirement. The HSAs contribution limits and coverage are decided annually, so it is best to check the IRS website for the most up-to-date information.
Explore our HSA page to learn more and apply online today.