HSAs: The Medical IRA

By: Steve Christenson, EVP, Ascensus.

When I travel around the country and speak with organizations about health savings accounts (HSAs), there is a fairly clear divide between those that see the longer-term value and those that see HSAs simply as a spending account with little value to consumers and no opportunity to cross-sell. It is the latter viewpoint that requires a respectful challenge.

Let’s start with some basic assumptions.

  • Not everyone is eligible for an HSA. When someone critiques an HSA, one of the first arguments is that it does not work for everyone. It is true that those who are receiving medical assistance or other forms of subsidized care will not likely benefit from an HSA, as they do not have money to set aside for medical expenses. But if someone is HSA-eligible and pays any level of federal income tax, that person is a strong candidate to benefit from using an HSA as a long-term savings tool.
  • Individuals automatically get an HSA when their employer offers a qualifying high deductible health plan (HDHP). Unfortunately, recent surveys show that is not true. The surveys reflect that roughly 50 percent of employers (most of which have 200 or more employees) offer a paired HSA with the HDHP. Further, the data reflects that for those employers that do offer the HSA through payroll deduction, only half of the employees take advantage of it. This means that for employees who purchase an HDHP through their employer, only one out of four actually contribute. That leaves 75 percent of employees in this category plus those who purchase individual plans on the exchanges to understand HSA benefits on their own—and then find a financial organization that offers HSAs.
  • HSAs are spending accounts. In the beginning, most of them were, but through use and education, HSAs can become a key savings tool alongside an IRA or a 401(k) plan. They evolve into a savings tool, then an investment account in a few years’ time.

The reality is that use of HDHPs by employers and insurance exchanges will continue to increase. For the employer, it is simply a matter of economics to offer affordable benefits for its employees. For the HDHP to function as a benefit, an HSA is a necessary part of the equation.

The recent NAFCU webinar, we took these topics into greater depth and provided ways to use HSAs as a key tool to increase and retain your member base. You will see the evolution of HDHPs and HSAs and how HSAs have grown in a similar fashion as IRAs.  Our webinar explains how an HSA can provide triple-tax benefits and become a long-term tool for a more secure retirement while providing benefits now. Watch it now On Demand

Ascensus Logo NewAscensus is the NAFCU Services Preferred Partner for IRA, Retirement Plan, and Health Savings Account (HSA) Solutions Software, Training, Documents and Consulting. To learn more about our partner, visit www.nafcu.org/Ascensus