Health Savings Account

Health savings accounts solutions provided by Coverra Insurance Services.

As the cost of healthcare and providing benefits to employees continues to rise, employers need to explore options beyond the traditional health insurance plan. Offering your employees a health savings account can be a cost-effective way to enhance your benefit plan while providing both immediate and long-term value.

A health savings account, or HSA, is an employee-owned savings account where money can be set aside on a pre-tax basis to be used to pay for qualified out-of-pocket medical expenses. These medical expenses include things like deductibles, copays, coinsurance, and more. Contributions can be made by both employees and employers.

Employers who wish to offer HSAs must have a Section 125 plan (also known as a cafeteria plan) in place. An employee must be enrolled in a high deductible health plan (HDHP) in order to make or receive contributions to the HSA. Contributions are transferred to a custodian, typically a bank, where they are held until withdrawn.

Employee contributions to an HSA are pre-tax. Employer contributions are not taxable to the employee either. Employees can use the funds in the account for qualified medical expenses at any time. For example, as they incur medical expenses years down the road, they will not be taxed. After age 65 or in the event of a disability, the funds can be used for any expense without a tax penalty, though these withdrawals would be subject to income tax.

Health savings accounts are not only a tool that can be used by employees in the present, they can be held for future expenses as well. Amounts held in an HSA will earn interest on a tax-free basis and they may also be invested. When an employee leaves their job, they are able to take their account with them, including employer-funded contributions, making HSAs an effective savings tool.

Health savings accounts allow employees to roll funds into the next year, unlike flexible spending accounts where that money does not carry over.

Eligible medical expenses such as deductibles, copays, coinsurance, and other qualified medical expenses.

The necessary high deductible health plan (HDHP) carries a lower premium, saving both the employer and the employees money. Because employee premiums and HSA contributions are made pre-tax, employers save on payroll taxes. Employer contributions to HSA accounts are tax-deductible, meaning even more savings. Employers have the flexibility to decide the funding schedule, which can also make them budget-friendly.

We can help you determine if offering a health savings account (HSA) will benefit your business or organization. Contact us to learn more and discuss your options.