Have you ever heard that HSAs are good for some people but not for others? This isn’t really true. HSAs and HSA-based plans are advantageous at almost every stage of life and for every medical need, especially when an individual educates herself about how HSAs work and how to take advantage of their long and short-term benefits.
Below is a fictitious example that has real-world application to millions of people.
Jack is a MotivHealth Insurance member who has health insurance and an HSA. He pays $300/month in premiums. He used to pay a lot more in premiums, so he puts those savings in his HSA, which comes out to $1,500/year into his HSA.
Year 1-2: Healthy Jack
Jack doesn’t have any major medical expenses for two years. He had several health screenings, and got his flu shot, but those were all covered 100% by insurance as preventive care. He’s saved a lot on premiums, and put those savings ($3,000) went into his HSA, to reduce his taxable income, and prepare for future medical expenses. Smart move, Jack!
Year 3: Jack Gets Hurt
What Happens?Jack hurt his leg, and the medical bills came out to $2,000. He hadn’t met his deductible yet, so he used his HSA dollars to pay for it. With a traditional plan, Jack would have paid out of his bank account to reach his deductible, in addition to having paid higher premiums for two years. Instead, Jack still has more than $1,000 in his HSA when year 3 ends.
10 Years Later
Jack Needs Surgery
Jack needs an expensive surgery. He has been saving into his HSA for years, so he uses those funds to reach his max-out-of-pocket costs. With a traditional plan, he’d have no health savings to pay his deductible and coinsurance. And with an HSA-based plan, he’s saved more than $10,000 on premiums over ten years, and more when adding in the tax benefits. His HSA-based plan is better than a traditional plan.