Choose the right health savings or reimbursement plan and save on medical costs
Many workers in the region will not only decide soon on the best mutual health insurance for 2023, but also on a health savings or reimbursement plan.
“These reimbursement accounts give individuals the opportunity to stretch their dollars and, in one case, grow them for future needs,” Richard Argentieri, director of sales and marketing at Independent Health.
Argentieri has broken down three types of accounts that are often available.
1. Health Savings Account (HSA)
This type of savings account helps health insurance members of eligible high-deductible health plans cover deductibles, copayments, and other out-of-pocket medical expenses. Employers and employees can contribute. Earnings and withdrawals for qualifying expenses are all tax-free. Unspent HSA funds are carried over from year to year, so employees can build funds to cover current and future healthcare expenses.
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An HSA allows account holders to invest their contributions in mutual funds within their accounts. In retirement, this money can continue to be used tax-free for medical expenses or for any reason taxed as income, without penalty, just like an IRA or 401(k).
Contribution ceilings: The IRS sets limits for HSAs. In 2023, they are $3,850 for individuals and $7,750 per family in combined employer and employee contributions. Account holders age 55 or older can make an annual catch-up contribution of $1,000
A person can qualify for this account by having a high deductible health plan. For 2023, the minimum deductible amounts are $1,500 for an individual and $3,000 for a family. The maximum disbursements are $7,500 for an individual and $15,000 for a family. “This limit does not apply to off-network services,” Argentieri said.
“Individuals can establish their own HSAs,” he said, “or they can be offered in conjunction with a high-deductible plan.”
2. Flexible Spending Account (FSA)
This employer-sponsored benefits program allows employees to deduct pre-tax dollars from their wages to pay for eligible medical expenses for themselves, their spouses and dependents. At the beginning of each plan year, employees can choose to contribute a certain portion of their pre-tax income to fund their account. “Employees must use these funds in the year of the plan,” Argentieri said, “however, the plan may provide either a two-and-a-half month grace period or carry forward funds up to $610 in 2023. All unused funds are returned to the employer at the end of the plan year.
Contribution ceilings: For 2023, if an employee is married, each spouse can contribute up to $3,050 to their own employer-sponsored FSA, even if both participate in the same employer-sponsored account. An employer-sponsored plan may further limit contributions.
3. Health reimbursement terms (HRA)
Employees can use these employer-owned accounts for specific medical expenses, such as deductibles, co-pays, coinsurance, dental, or vision. Contributions are paid solely by the employer.
Contribution ceilings: The amount available in this account is set by the employer. The employer has the option of keeping unused funds at the end of the plan year or rolling them over to the following year. There is no minimum or maximum amount.