Hopper Insurance Services
The Strategy

Health Savings Account Benefits

Why an HSA paired with a high deductible health plan works so well over ten and twenty years, and why it is the deepest specialty at this agency.

The beauty of employee directed benefits

A health savings account is a tax advantaged account that you own, paired with an HSA qualified high deductible health plan. Instead of paying a higher premium for benefits you may rarely use, you keep the difference and put it to work.

When employees elect the HSA option there are a number of additional benefits that are simply not available with traditional plans. Looked at over a period of ten to twenty years or more, those benefits are quite substantial.

What makes an HSA different

  • The triple tax advantage, federally. Money goes in untaxed, either pre-tax through payroll or as a deduction on your return if you contribute directly, grows tax free inside the account, and comes out tax free when it is used for qualified medical expenses.

  • The California catch. California has never adopted the federal HSA rules, so contributions are not deductible on your California return and the account's earnings are taxable by the state. The federal advantage is still the larger number, but talk to your tax preparer about the California side before you decide.

  • The money is yours. An HSA is not a use it or lose it account. Whatever you do not spend rolls over year after year, and the account goes with you if you change jobs or retire.

  • It plans ahead for you. Health care in retirement is one of the largest expenses most households will ever face, and this is the one account built to pay for it tax free.

The deepest specialty at this agency

Bob Hopper, Ph.D., who founded the agency in 1996, wrote the health savings account continuing education textbook used by insurance agents across the country: The HSA Strategy: The Future of Health Insurance in America.

He has taught The HSA Workshop as a statewide instructor for the California CPA Education Foundation, presented on health savings accounts at national conferences, and written two further books on health care.

What that means for you

  • You are getting HSA guidance from the person a good many other agents learned it from.

  • We can explain the mechanics in plain language rather than sales language, including the parts that are genuinely inconvenient.

  • We will tell you honestly when an HSA plan is not the right fit. The most common reason to choose a traditional plan instead is an expensive brand name prescription that is not on the formulary.

The benefits

What an HSA actually does for you

These are the benefits that do not show up on a premium comparison, and they are the ones that compound.

Substantially better benefits for healthy employees

Employees who use the health plan mainly for an annual physical get little from an expensive plan built around low copays they seldom use.

With an HSA plan they put the premium difference into their own account instead of handing it to the insurance company for a richer plan they rarely touch.

Greater control over future premium increases

The employer contribution is tied to an HSA qualified plan, which is often the least expensive plan the carrier offers.

When premiums rise by a given percentage, the dollar increase is smaller on the affordable plan than on the expensive one. Since employer and employee share the premium, both of them benefit.

A reward for good health

If an employer puts money into an HSA and the employee does not need to spend it, that money is effectively a reward for staying healthy. It is a natural and inexpensive way to start a wellness program.

The ability to eliminate future financial risk

Save steadily in a tax protected account for three to five years and you build a pool of tax free money large enough to cover the plan's out of pocket maximum, in more than one year if you have to.

It makes great sense to plan and save in advance for a big expense rather than be surprised by it.

A personal wellness budget

HSA dollars can pay for qualified health expenses that the plan itself does not cover, which gives people a reason to spend on their own health.

What qualifies is set by IRS rules and some items need a physician's involvement, so ask us before you spend rather than after.

Paying claims with tax free dollars

This is the feature people underestimate most. Paying medical bills with tax free dollars is what makes an HSA based plan comparable to a far more expensive plan, and substantially better in a year when you reach the out of pocket maximum.

Planning and saving for health care in retirement

An HSA functions like a medical IRA or a 401(k), only better. Withdrawals from a traditional IRA or 401(k) create taxable income. Withdrawals from an HSA for qualified health care are tax free.

Independent estimates of what a couple will spend on health care from age 65 onward run well into six figures, and those estimates are refreshed every year. If you are not factoring health care into your retirement savings strategy, you are leaving out one of its largest line items.

Why this matters most later

  • Medicare does not pay for everything. Premiums, deductibles, dental, vision, hearing and long term care costs all continue after 65.

  • For a company with no retirement plan in place, an HSA can do double duty as both a health tool and a retirement tool.

  • Both employer and employee can contribute, an employer can match employee contributions, and employees can payroll deduct pre-tax money into the account. In California, employer contributions still count as taxable state wages.

  • Many HSA custodians offer investment options inside the account. Fees vary a great deal between custodians, so compare them the way you would compare a retirement account.

  • From age 65 on, you can withdraw tax free for health related expenses, or pay ordinary income tax on withdrawals used for anything else. Before 65, a withdrawal that is not for qualified medical expenses is taxed as income and carries an additional penalty on top, so retiring early is not the same thing as turning 65.

  • One rule to plan around: once you enroll in Medicare you can no longer contribute to an HSA, though you can keep spending what you have already saved. Part A can also be backdated up to six months when you claim Social Security after 65, which can turn contributions you already made into excess contributions. Stop contributing early enough to stay clear of that, and call us before you file for Medicare.

How much can you contribute?

HSA contribution limits are set every year by the IRS, and they change. So do the minimum deductible and maximum out of pocket amounts that make a health plan HSA qualified in the first place. Family coverage carries a higher limit than individual coverage, and account holders age 55 and older can make an additional catch up contribution each year. If your spouse is also 55 or older and has an HSA of their own, they can make a catch up contribution to it.

We deliberately do not publish the figures on this page, because a stale number on a website is worse than no number at all. Call us and we will confirm the current limits for your situation, including which coverage tier you qualify for, before you set up a payroll deduction.

The ideal plan for a business owner

An HSA based plan suits the business owner particularly well, because owners often have the financial resources to fund the account fully. That is more true still with family coverage, where the contribution limit is higher, and after age 55, when a catch up contribution becomes available to the owner and to a spouse with an account of their own.

Employers who offer an HSA based plan and take the time to educate employees on how it works are providing a genuinely terrific long term benefit, not simply a policy.

Test it on yourself first

  • Since 2004 Hopper Insurance Services has recommended that business owners enroll themselves in an HSA based plan unless there is a mitigating health concern.

  • It gives you first hand experience of the plan before you recommend it to your employees.

  • Owners who took that advice and stayed in reasonably good health should now have a substantial pool of tax free cash set aside for health care in retirement.

Implementation

What we handle for the employer

We make it easy and understandable for employers to offer employee health insurance benefits. To do that, we provide a range of services.

  • Educate employees on their benefits, before enrollment rather than during it.

  • Distribute the Summary of Benefits and Coverage to employees, as required by the ACA.

  • Enroll employees.

  • Handle questions and problems with claims and with billing.

  • Meet annually to review plans and premiums.

  • Answer questions from your employees through the year, not only at renewal.

Want the current HSA numbers for your situation?

We will confirm this year's limits, check whether a plan is HSA qualified, and show you what the difference is worth over time.

Talk to Us About HSAs Call (805) 966-4900