In Illinois and across the country, the number of workers choosing high-deductible health insurance plans is on the rise. And at first glance, it’s easy to see why — these plans take less money from an employee’s salary as a bonus, leaving the worker to pay more only if medical attention is needed. It’s a deal that more and more Americans are finding too good to pass up.
But what happens when these medical issues arise and workers on these high-deductible health plans are stuck with potentially huge bills because their deductibles weren’t met? Well, that’s when it helps to have a little something in store – a plan that starts with opening a health savings account (known as an HSA) at Prospect Bank.
“What the Health Savings Account does is allow you to save funds for eligible medical expenses that can be used for yourself, your spouse, or any of your dependents,” explains Brittany Cluver, director of deposits at Prospect Bank, headquartered in Paris and serving central Illinois since 1873.
“From your co-payments to your prescriptions to medical bills, if you have procedures or need contact lenses or glasses, these are typical qualified medical expenses that would be covered by a savings account. health. One of the big advantages is that this money is yours forever and you can name beneficiaries on the account. If something should happen to you, the money can be transferred to a spouse. So it’s not “use it or lose it”.
A flexible way to cover costs
HSAs are only available to people covered by high-deductible health insurance policies, and the IRS determines eligible medical expenses. But the list is vast and growing, recently including telehealth and various over-the-counter products. And it’s simple to use – medical expenses can be paid via a debit card linked to the HSA account, or via Prospect Bank’s online services.
“It’s very flexible,” says Cluver. “If you’re spending the money from your normal operating account, you can transfer the money. And as long as you have a receipt to prove that’s the amount you spent and you can document that transaction, the way you can use it is quite flexible.There are even clients who pay all their normal medical expenses throughout the year, keep an account of them, and then make a large transfer from their health savings account to their normal personal account at the end of the year. And this meets the need. So there are different methods to access these funds.
HSAs also have an added benefit: contributions are tax-free, although the IRS limits the amount users can deposit into an account per year, which for 2022 is $3,650 for an individual or 7 $300 for a family. Prospect Bank offers tiered interest rates, which pay 0.2% for amounts up to $4,999.99, 0.4% for amounts between $5,000 and $14,999.99 and 0, 6% for amounts of $15,000 or more.
Just like a 401(k), HSAs also have withdrawal restrictions. Using the money for non-medical expenses before age 65 means the account holder must pay taxes on the amount plus an additional 20% penalty. After age 65, withdrawals for non-medical expenses do not incur a penalty, although the account holder must still pay taxes on the amount.
Although users cannot continue to make HSA contributions once they enroll in Medicare, between the ages of 55 and 65 they can make additional contributions of up to $1,000 above the annual limit for help them prepare financially for retirement. And again, the money never goes away. At any age, you are still able to draw from your Prospect Bank HSA to help pay eligible medical expenses as determined by the IRS.
“You can still use it at age 80 for a hip replacement, or whatever the case may be,” Cluver says.
Even young adults can benefit
But consumers should be thinking about HSAs long before that point — after all, it’s young, healthy people with few medical issues who typically gravitate toward high-deductible health plans and would stand to benefit the most from an HSA than ‘they can open now and save for any time it’s needed. In some cases, employers will make contributions to their workers’ HSAs, the money that’s left on the table without a health savings account. Cluver knows the benefits well — she’s used her HSA to pay for things like braces and glasses for her kids.
Cluver and his staff at Prospect Bank are working to raise awareness of HSAs, sending out literature and talking to employers about the benefits of having a health savings account. Some people long accustomed to the standard premium/deductible method may not even know there is another avenue available to them. “It’s asking them to think outside the box,” Cluver says, “and realize that by using this HSA with your high-deductible plan, you’re saving for your future.”
Want to learn more about what a Prospect Bank Health Savings Account can do for you? Visit any of its nine locations in central Illinois, including the main branch at 177 West Wood St. in Paris, call (877) 465-4154 or visit BankProspect.com for more information.