How to Benefit the Most from Health Savings Accounts. Know the Medicare Rules!
Health Savings Accounts represent win-win opportunities for working people who can afford to contribute funds they can later use to pay for medical expenses. In today’s article, we’ll take a look at the basic information you need to benefit the most from an HSA – and hopefully not make any expensive mistakes in the way you fund or use your account.
First, What Is an HSA?
HSA stands for Health Savings Account. It is a pre-tax account where you can deposit funds that you can later use to pay for health care expenses. Typically, an HSA is tied to a high-deductible health plan that you have from an employer.
What Is a High-Deductible Health Plan (HDHP)?
HDHPs are health insurance policies that have a low monthly premium but high deductibles. In other words, you might have to pay the first $1,000 toward certain forms of medical care, but costs beyond that amount will be covered by the plan. Many plans require members to use caregivers who are approved by the plan – who are “in-network.”
What Kinds of Expenses Will an HSA Pay For?
It depends on the plan you have chosen and how much it costs. But many HSA plans cover more kinds of care that you might expect, including drugs and medications, acupuncture, addiction recovery services, ambulance transportation, diagnostic tests, medical equipment like crutches and wheelchairs, diabetic supplies, and even vaccinations and vasectomies.
If your employer will assist you in participating in an HSA that the company offers as a benefit, be sure to read the fine print in that plan’s handbook or on its website to find out what services will be covered.
How Many People Have HSAs?
According to some statistics, as many as 50% of working people have them today. The plans have become more popular over the last decade as high-deductible health plans have become more popular.
Can You Have an HSA and Medicare at the Same Time?
You cannot continue to contribute to your HSA after you are enrolled in Medicare. Further, you should stop contributing to your HSA six months before you even become eligible for Medicare.
But after you have stopped contributing, you can still use the funds in your HSA to pay not only for qualified medical care costs, but even to pay for your Medicare Part B, Medicare Part D, and also the costs of some other forms of insurance as well.
Do You Have to Liquidate All the Funds in Your HSA By a Certain Date?
No, you don’t. There is no limit to the length of time you have to use that money. But just to clarify, you should stop contributing to your HSA six months before you are qualified for Medicare, or before your Medicare coverage starts.
What Is the Most Common Way People Mishandle HSA Accounts?
The most common mistake happens when people don’t remember to stop contributing to their HSA accounts until they are about to enroll in Medicare. In other words, they forget about the six-month lookback period and just go on depositing money for too long into their HSA accounts.
What if that happens to you? CoverRight’s advice is that in general, contributing too late is not a big problem. You should call your HSA plan administrator and simply ask to have the contributions that were made too late taken out, so you don’t break any rules.
What if Several Members of a Household Are Contributing to the Same HSA?
Here, things can become somewhat complicated.
One example? If one spouse is on Medicare and the other is in an employer-sponsored health plan, as long as the HSA account is not in the name of the person who is on Medicare, the other spouse can continue to contribute to the HSA.
Are There Other Rules to Be Aware Of?
Not many! The biggest thing to be aware of is that six-month lookback rule and to not pay into an HSA too late!
But the rules and limitations can be puzzling. To be sure you are getting the most benefits from participating in an HSA, contact CoverRight. Let’s get a licensed Medicare counselor on your side, working for you.
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