As a wellness professional, it can be easy to focus efforts solely on the patient in front of you. The balance of running your business while caring for patients is a never-ending juggling act, so business growth strategy can often be put on the back burner.
Keep reading for a quick synopsis of the HSA mechanism, why it exists, what the future of healthcare benefits may look like, and why you, as a wellness professional, should care (very much!). This will also give you some insight as to why we at Soul Being are swinging for the fences to plug into the HSA framework.
Investing just a few minutes in this quick read will certainly help you understand the complex relationship between healthcare benefits and wellness offerings better, will hopefully give you some insight into the industry beyond your practice, and could help change your business strategy as soon as today!
What is an HSA?
By definition, an HSA (Health Savings Account) is a medical savings account that allows the subscriber to set aside pre-tax dollars to pay for qualified medical expenses. In other words, this mechanism serves as a handy way to save for medical expenses – planned or unplanned – and reduce taxable income. The goal of an HSA is to reduce overall healthcare costs and prepare for future health-related expenses.
Anyone enrolled in a high-deductible health insurance plan (HDHP) can qualify for an HSA – these are commonly offered to full time employees. It’s common for health insurance providers to offer HSAs, but alternatively, an individual can open a separate HSA account at most financial institutions.
Contributions to an HSA account are variable and decided upon annually by the individual, though government-mandated maximums cannot be exceeded ($3400/individual and $6750/family in 2017). Debit cards are typically issued and linked to the HSA balance to be used toward any HSA eligible medical expenses, including deductibles, copays and coinsurance, plus other qualified medical expenses not covered by the insurance plan.
Unlike a Flexible Spending Account (FSA), an HSA balance rolls over from year to year, so contributions are never lost and will accumulate over time. This makes it a great savings mechanism that can be accessed for health-related expenses at any time, including in retirement.
After turning 65 years old, the rules are a little different. If on Medicare, contributions to the HSA must end, but the money accumulated in an HSA can still be used. Once an individual turns 65, HSA money can now be spent on anything – medical expenses or otherwise – without penalty, but with the addition of income taxes on HSA withdrawals not used for medical expenses.
Why do people contribute to their HSA funds?
In 2018, 56% of employers offered HSAs to their full-time employees, and the average annual spend of these employers on the preventative health of each employee is significant – north of $700. This includes matching contributions to an HSA fund, as well as onsite fitness offerings, rewards programs, reimbursements, and other corporate wellness initiatives.
One of the greatest benefits of HSAs is the inherent triple tax advantage:
• Not taxed when you earn it and put it into the HSA
• Not taxed as it grows
• Not taxed when you take it out of the HSA to pay for medical expenses
This means that HSA contributions are pre-tax/tax-deductible, the money grows tax-free, AND the money can come out tax free. In other words, contributions are made before income is taxed, no taxes are paid on the account’s growth, and withdrawals for eligible expenses, do not incur tax either.
Here’s a practical example to help illustrate: because income is taxed after you make HSA contributions, you will be taxed as though you make less money. Say, for example, you make $40,000 per year. If you put $3,000 in your HSA, you will be taxed as though you make $37,000, thus lowering your tax burden. In addition, if your employer contributes to your HSA, that money isn’t counted as income, and so you’re not paying taxes on it, either. Therefore, if you manage your HSA correctly and follow all of the IRS rules, you can reap significant financial benefits.
What does the future hold?
In practicality, the multiple tax incentives encourage both employee and employer to contribute funds to be used in either the short or long term for preventative health or traditional medical expenses. This becomes increasingly important as the baby boomer generation ages and begins to reach retirement, searching for additional retirement savings mechanisms and requiring more in terms of healthcare needs.
Simultaneously, the millennial generation is incredibly invested in preventative health strategies and increasingly moving away from traditional western medical approaches in favor of a more empowered, holistic, and proactive health strategy. This demographic demands benefits that support this mindset and are looking for approaches to health that incorporate mental, physical, and emotional health, which fits very well with the HSA investment opportunity.
Healthcare and wellness are notoriously unpredictable, but the trends in this category are strong and positive, with seemingly only upside to come in the future years. More employers are offering high deductible plans with HSA options. More employees begin to take advantage of HSA as they become increasingly aware of the benefits of this investment. More preventative healthcare and alternative wellness categories continue to be added to the HSA-eligible list.
What does this mean for me?
Wellness professionals can benefit greatly from the growing HSA trend with the right education and understanding of how the mechanism works – so if you’ve made it to this portion of the article, you’re more than halfway there!
As a next step, check out the full list of HSA-eligible categories at https://www.wageworks.com/employees/support-center/hsa-eligible-expenses-table/. Here you will find both overtly HSA eligible categories (i.e. acupuncture, massage) and indirect treatments of chronic conditions through alternative means (anxiety, alcoholism, obesity). If your wellness practice qualifies to treat any of the named conditions, your patient pool can potentially pay for your services with their HSA dollars!
You can start marketing your services using this newfound knowledge today! Stay tuned for future blog posts regarding marketing strategies around HSA dollars. And remember, www.soulbeing.com is a great resource for both you and your patients in terms of gaining further education for all things wellness, and getting the adequate approvals in place for using HSA funds towards preventative health services.
Are you already taking advantage of the strategy? Do you have best practices and learnings to share with your fellow healthcare providers? We’d love to hear from you! firstname.lastname@example.org