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If your company offers a Health Savings Account to employees as part of their medical benefits and compensation package, you may be familiar with HSAs. Understand what an HSA is, how it works, and best practices for providing communication to your employees.
If your company offers a Health Savings Account to employees as part of their medical benefits and compensation package, you may be familiar with the term. An HSA can be a great benefit that allows the beneficiary to set aside pre-taxed money and use it for qualifying medical expenses.
When a qualifying medical bill is received, participants may use their HSA funds to cover the charges just like you would with any other debit card allowing for easier payment and less claims-related documentation.
HSAs are typically offered as part of an employer-sponsored medical benefits package alongside a High Deductible Health Plan or HDHP. Generally, these types of plans only cover basic preventative services before the deductible. Since the plan deductible is higher, the HSA offers a great way to help cover expenses.
Account holders are issued a debit card for transactions as a single-access point to the account funds. Medical expenses and bills not covered by the HDHP are simply paid for with the issued card allowing for simpler transactions and less paperwork and documentation that is commonly found with more traditional healthcare claims.
Funds from an HSA can be used towards a variety of medical-related expenses such as deductibles, copayments, and coinsurance, as well as many other common treatments and expenses such as eyeglasses and contact lenses, vision and dental care, lab fees, over the counter drugs, and more.
In most cases, however, HSA funds cannot be used to cover insurance premiums.
Additionally, many HSA plans offer investment opportunities once the account funds exceed $1,000. The interest earned when doing this is tax-free proving yet another great opportunity to grow funds for medical expense coverage.
Funds may be contributed to an HSA from the account holder’s paycheck each period, pre-taxed up to a certain limit each year as set by the IRS. In 2021, for example, the contribution limits were a maximum of $3,600 for self-only coverage and a maximum of $7,200 for family coverage. After the limit is reached, no more funds can be added for the duration of the plan year.
Additionally, employers can choose to contribute funds to their employee’s HSA as part of their offered medical care benefits package. HSAs benefit employers who can enjoy lower premiums and taxes on coverage for their employees.
While annual limits exist on how much you can contribute to your HSA in a given year, the funds in the account roll over and never expire, allowing the account holder to save long-term for future medical expenses.
If your company offers an HSA to employees as part of their medical benefits and compensation package, it’s essential to ensure beneficiaries know how their plan works.
In addition to your HR team and direct communication from the carrier, stay tuned for more Morris & Garritano’s wellness newsletter offering further education for your employees, coming soon!