Health Savings Accounts are a coveted benefit for their flexibility and tax breaks, but employees may not be aware they can use those dollars to help weather the COVID-19 storm.
“Now more than ever, the HSA is a valuable tool to help with financial and health concerns,” says Alison Moore, vice president of marketing at HealthSavings — a Richmond HSA company. “Employers should take the opportunity to educate their employees about how they can make the most of their HSA during the current crisis.”
Moore spoke in a recent interview about recent changes to HSA guidelines and why employers should educate employees about how they can use this tool to their benefit.
Why should employers encourage employees to use their HSA right now?
HSAs give people more control over their healthcare and a well-deserved tax break. It also makes people more aware of what things cost. Some of the fundamental flaws of our healthcare system are that there’s so little cost transparency. People paying directly with their HSAs start asking more questions.
The passage of the Secure Act and the new IRS rulings loosened the requirements on how you can spend your HSA savings. For example, in the past people couldn't use their HSA for telehealth or over the counter medication, but now they can. The HSA can also be used for feminine hygiene products — we know how expensive those can be. People need to take advantage of these rulings when they shop. With fears of being laid off because of the virus, it’s important to use the income you have as wisely as possible. You should avoid drawing out of other retirement funds, and exhausting your savings as much as possible.
What can employees spend their HSA dollars on during the pandemic?
Some HSA qualifying health plans will cover COVID-19 testing and treatment before you’ve met your deductible, but not all of them do this. In that case, you can actually use your HSA dollars to pay for testing. Now remember, it may not always be possible at some of the makeshift locations, like parking lots, where they’re currently doing testing. If you go somewhere where they can’t scan your HSA card, you can pay another way and reimburse yourself with your HSA dollars. You just need to make sure you keep the receipt, or other sales documentation.
Also, because of the virus, telehealth is really having its moment. If you need to see your doctor for something that’s not related to coronavirus, it’s very likely that you’ll be using your provider’s telemedicine services. Make sure you take advantage of the new rulings and use your HSA to pay for those visits.
How can employers and employees maximize the benefit of their HSAs, now and in the future?
The best thing either of them can do is fund it. One of the new IRS rules extended the tax deadline to July 15, which means you have until then to fund your 2019 HSA. My recommendation is to fund it to the max for last year. You’re limited to how much you can put in your HSA a year, and since you put the money in tax free, it grows tax free and you can withdraw it tax free — you need to make sure you contribute as much as you can.
Employers should also consider making contributions — even if they’re thinking of dialing back benefits because of the virus — because the HSA gives them the best value. They’re able to help their employees save for both medical expenses and retirement with it, so the contribution will be more helpful even if they decide to cut back on other programs.
Additionally, if employees want to help a friend or loved one who’s going through a rough time because of the pandemic, they can contribute to their HSA. Anyone can send a check or electronic transfer to another person’s HSA — even a parent of an adult child. It’s a great way to help if you’re concerned that person won’t spend your contribution on something constructive. But in all honesty, helping someone save for the future and current needs is a really great, and effective, way to show someone you care.
