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February 2018

Everything You Need to Know About Health Savings Accounts

Everything You Need to Know About Health Savings Accounts (HSAs)

02/27/2018

 

If you have questions about health savings accounts, we have answers:

 

1. What is an HSA?

A health savings account (HSA) is a tax-advantaged account established to pay the current and future qualifying medical expenses of the account holder, the account holder’s spouse and all of the account holder’s tax dependents. With money from this account, you pay for healthcare expenses that are not covered by the account holder’s HSA eligible health plan.

 

2. Am I eligible to have an HSA?

To put money into a health savings account, you are required to have an HSA eligible health plan— sometimes referred to as a consumer-directed health plan (CDHP) or high-deductible health plan (HDHP)—in effect on the first day of the month.  Additionally, you are not permitted to have any other health coverage that reimburses non-preventative products and services below the deductible, and you cannot be enrolled in Medicare or be claimed as a tax dependent on someone else’s tax return.

 

3. What is a high-deductible health plan (HDHP)?

An HDHP is simply health insurance that meets certain minimum deductible and maximum out-of-pocket expense requirements set forth by the IRS.

 

4. What are the benefits of having an HSA?

Health savings accounts in many ways offer something for everyone, offering you a way to gain some financial security today and in the future. As triple tax-advantaged accounts, health savings account contributions can be deducted pretax from your paycheck, lowering your taxable income; any interest or investment gains on the money is tax free; and withdrawals from an HSA are tax free, as long as the money is spent on qualified medical expenses.

 

5. What qualifies as IRS-qualified medical expenses?

HSA funds may be used tax-free when paying for qualified medical expenses as described in section 213(d) of the Internal Revenue Service Tax Code.  A list of these expenses can be found on the IRS website at www.irs.gov in publication 502 – Medical and Dental Expenses.

 

6. Can I take money out of my HSA for non-medical expenses?

Yes, but if you withdraw money to pay for something other than a qualified medical expense, you will have to include that distribution as other income when filing taxes and pay an additional tax of 20 percent penalty on the amount used for a non-qualified expense.

 

7. Do HSA funds rollover?

Yes, any unused funds are yours to retain in the health savings account and accumulate toward future healthcare expenses. Your HSA is portable, meaning that you can take it with you if you change employers and into retirement where funds may be used for non-qualified medical expenses without being subject to the 20 percent penalty.

 

8. What’s my HSA contribution limit?

The IRS provides inflation-adjusted health savings account contribution limits each year. For 2018, if you’re covered by an individual HSA eligible health plan, sometimes referred to as a consumer-directed health plan (CDHP) or high-deductible health plan (HDHP), the IRS allows you to put as much as $3,450 into your health savings account (HSA). If you’re contributing to an HSA and on a family CDHP, the maximum amount that you can contribute is $6,900.

 

If you’re 55 or older, you can contribute an extra $1,000 annually for a total of $4,450 or $7,900 for account holders on a family plan—with catch-up contributions accepted at any time during the year in which you turn 55. These HSA contribution limits are new for 2018 and just slightly higher than in 2017—$50 more for self-only coverage and $150 more for those on a family plan.

 

Need help determining how much you should set aside in your HSA each month to reach your retirement savings goal? WEX Health provides a free HSA Goal Calculator that you can use to determine the right amount for you.

 

9. Are HSAs used to pay for current medical expenses or to save for retirement?

Either or both. Because healthcare costs during retirement can be daunting, HSAs have become a favorite way to put money away for future medical bills while lowering taxable income. One oft-cited estimate from Fidelity: A 65-year-old couple retiring in 2017 can expect to spend an average of $275,000 on medical expenses throughout retirement. This is up from $260,000 in 2016, so one can only imagine how staggering this figure will become for those retiring a few decades from now.

 

10. What’s this I hear about investing my HSA dollars?

An health savings account is an excellent savings vehicle for healthcare costs during retirement, but few people have discovered that they can maximize their account’s long-term savings potential by investing their contributions in stocks, mutual funds and other investment vehicles. Studies show that HSA holders who take advantage of investments often have substantially higher account balances. Devenir reports that the average balance of an HSA investment account is six times larger than a non-investment holder’s average HSA balance. Over time, the savings advantage continues to multiply: The Employee Benefit Research Institute found that HSA investment accounts opened in 2005 had an end-of-year balance in 2016 that averaged $31,239 compared to average balances of $7,233 in accounts without investments.

 

11. What does WEX Health have to do with HSAs?

Through our WEX Health Cloud platform and our vast network of partners, WEX Health is currently powering more health savings accounts than any other HSA platform in the country.

 

We provide a variety of user-friendly tools to HR professionals, benefits leaders and consumers that empower them to find ways to save money and control healthcare costs with HSAs and other consumer-directed healthcare accounts.

 

For consumers: With the WEX Health Cloud Consumer Portal, Mobile App and WEX Health Payment Card, consumers have the ease of paying for their out-of-pocket healthcare expenses in a quick and efficient manner. Not only can they use the app to check available balances, view HSA transaction details, make contributions and take distributions, but also they can now conveniently log in using Touch ID. Consumers can also simply swipe their WEX Health Payment Card, and the funds are automatically deducted from their HSA for payment.

 

For employers/HR pros/benefits leaders: WEX Health Cloud was designed to make things easier for employers, not harder. With our WEX Health Cloud Employer Portal and Employer Dashboard, employers and benefits professionals can gain access to an overview of employees’ healthcare spending and saving habits. As of November 2017, the dashboard also includes an innovative new method for assessing an employee base’s ability to pay for out-of-pocket expenses through the Health Financial Viability Index. This data is a key indicator of employees’ financial health and helps employers gain visibility into how their employees are spending their HSA dollars, so they can select plans that best fit their needs. The new HSA Advance functionality gives employers the option to offer employees the ability to “borrow” from their future HSA contributions while providing flexibility in employer management of the program.

 

Today’s workers and employers are utilizing HSAs more than ever. We tell you why on

What You Need to Know About Your HSA at Tax Time

What You Need to Know About Your HSA at Tax Time

02/19/2018

 

While many of us are already planning how we’ll spend our tax refund, we have to get our returns filed first. Before you decide to spend it on a vacation or your next remodel project, how can you invest your money to go further and help you tackle the rising cost of healthcare? In this post, we offer a suggestion along with a few other things that health-savings accountholders should keep in mind during tax season:

 

HSA contributions and distributions are non-taxable—unless you withdraw money to pay for something other than a qualified medical expense. If this is the case, you will have to pay an additional tax of 20 percent on the taxable portion of your distribution. You will calculate this tax amount using Form 8889 and will need to report the taxable amount on the “other income” line of your tax return, writing “HSA” beside it.

 

You can direct-deposit your refund into your HSA.

 

The average tax return last year was $3,120. By directing your refund to deposit directly into your HSA account, you’ll be ahead of the game for saving for medical expenses in 2018—or for healthcare expenses during retirement. (The annual HSA contribution limit for individuals with single medical coverage in 2018 is $3,450.) While this may not be the most exciting use of your tax refund, it may be among the wisest, especially when planning for retirement, as retirees who take money out of an IRA or 401(k) to pay for medical expenses will be taxed on these withdrawals. When they pay medical bills from an HSA, however, they will never be taxed. E-filing and selecting the direct deposit option is also the quickest way to get your return. Ninety percent of returns that are filed this way are received within a few weeks, while mailing in a paper return can require a six- to eight-week wait.

 

You will need to file a Form 1099-SA if you’ve taken money out of your HSA for any reason.

 

To report distributions from an HSA, you must file this form, which the custodian of your HSA is required to file and send to you. The form essentially notifies the IRS that money has left your HSA account. Because the government will also want to be sure you’ve spent any money you’ve withdrawn from your account on qualified medical expenses, this is the form where you will note whether or not you’ve held up your end up the HSA bargain with the government, so to speak.

 

You will also need to file Form 8889 to verify that you spent your distributions on qualified medical expenses.

 

If you made contributions to, or received distributions from, an HSA in 2017, you will also need to attach Form 8889 to your tax return. On this form, you will report these deposits and withdrawals (including those made on your behalf or by an employer) and determine your HSA deduction and the amounts you must include in income. Form 8889 will also help you figure the tax you will owe if you withdrew money from your HSA to pay for things other than qualified medical expenses.

 

On the subject of tax returns, the Internal Revenue Service urged taxpayers again this week to watch out for erroneous deposits from the IRS in their accounts. Following a breach of tax practitioners’ computer files, scammers have now filed several thousand false returns, using taxpayers’ real bank accounts for the deposits. The taxpayers who receive the deposit then receive an automated call purported to be from the IRS. According to the IRS, “Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.”

 

Americans have until April 17, 2018, to file their 2017 tax returns—this year, we get two extra days because April 15 falls on a weekend and April 16 is Emancipation Day, a legal holiday recognized in Washington, D.C.

 

To determine how much you should contribute to your HSA each month, read this post by Jason Cook, WEX Health’s vice president of healthcare emerging market sales.

What Is a QSEHRA?

What Is a QSEHRA?

02/13/2018

by Becky Kinder

 

We know, there are far too many acronyms in healthcare, but QSEHRA is an important one! And since it’s on the newer side, it’s led more than a few people straight to the Google search bar.

 

QSEHRA stands for “Qualified Small Employer Health Reimbursement Arrangement” (HR 5447). Also known as “a small business HRA,” it’s becoming a popular employee health coverage option that was established and signed into law in December 2016 as part of the 21st Century Cures Act.

 

QSEHRAs have effectively provided small business owners with smarter healthcare options with less overhead and more cost effectiveness. These plans are designed to assist employees with insurance premiums from a plan of their choosing, and in some cases, the HRA will also cover other medical expenses.

 

It’s a great option for small employers: employers set the amount that they can afford to provide employees (as long as it falls within the legal limits) and employees are reimbursed for the expenses the plan allows for.

 

Employers who offer QSHRAs must have fewer than 50 full-time employees and must not offer traditional employer-sponsored group health offerings (including dental or vision) to any of its employees.

 

With its Notice 2017-67, the IRS issued further guidance on QSEHRAs, including the rules and requirements for providing a QSEHRA, the tax consequences of the arrangement and the requirements for providing employees with written notice of the arrangement.

Public comments on the IRS’s guidance were accepted through Jan. 19. The notice also established that the deadline to submit initial notices for 2017 QSEHRAs and 2018 QSEHRA plans beginning Jan. 1, 2018, is Feb. 19, 2018.

 

To learn more about QSEHRAs and the QSEHRA-related guidance issued by the IRS, review our post here.


What Is a QSEHRA? by Becky Kinder

Becky Kinder

Product Manager, WEX Health

As a seasoned member of our Product Management team, Becky drives the definition and development of features for several different functional areas of the software, serving as the voice of our partners, employers, and consumers to our development teams. Specific areas of focus include notional accounts, debit card, admin operations, and the consumer and employer portals. Becky has over 15 years’ experience collaborating on the delivery of technology solutions for the IT and healthcare industries. Since joining the team in 2007, she has defined and launched hundreds of features on WEX Health Cloud platforms.

 

What You Need to Know About Data Security and Wearable Devices in the Workplace

What You Need to Know About Data Security and Wearable Devices in the Workplace

02/02/2018

 

Now that wearables and smart technology devices are frequently used to incentivize and measure participation in workplace wellness programs, activity trackers have emerged as an important—and sometimes debated—link between employee and employer.

 

Concerns about personal data and activity trackers made the news (again) this week, with reports that U.S. soldiers may have inadvertently revealed the locations of remote military bases in Iraq, Afghanistan and Syria by publicly sharing their jogging routes via the Strava fitness app.

 

And during a series of meetings last year between Apple and Aetna, Aetna employees’ questions about the safety of the data on their employer-provided Apple Watches ended up dominating the discussion—and the news media’s coverage of that discussion. By way of background, Aetna partnered with Apple in 2016 to provide select large employers and individual customers with Apple Watches, as well as offering to reimburse all 50,000 of its own employees for the watches. Apple has stressed that health information is only shared with user consent, and Aetna is continuing to gather feedback from its employees about whether or not the watches have had an impact on their nutrition and exercise habits.

 

Of the Apple/Aetna meetings, CNBC reported, “One of the biggest concerns with companies like Apple and Fitbit collecting health information, like steps and heart rate, is that it could get into the wrong hands. These fears are amplified as technology companies strike deals with self-insured employers and health plans.”

 

So what are employers and health insurers doing with the data they collect from activity trackers? The large majority of those employers are doing nothing with it and are providing employees and/or their customers with wearable devices only to encourage health and wellness in hopes of increased productivity and engagement and decreased healthcare costs.

 

Though it’s now common across industries, the trend of doling out activity trackers to employees and customers was popularized by healthcare companies. Back in 2014, tech startup Oscar made headlines when it partnered with Misfit, a wearable device company, to link its customers’ biometric information straight to their health insurance, presenting Amazon gift cards to those who met their fitness goals.

 

Since 2016, UnitedHealthcare has awarded employees who meet fitness goals (as measured by their wearable devices) with monetary prizes and credits that can be applied to a health savings account or health reimbursement account. The company’s vice president of emerging products recently reported that its program, which it calls “Motion F.I.T.”, has yielded “very impressive” engagement and activity rates. And, as part of its Wellvolution program, Blue Shield of California leverages the Walkadoo app, which keeps track of activity and allows employee participants to earn awards such as Fitbits and Visa gift cards. It has since also invited some of its plan participants to engage with the app in exchange for awards. OptimaHealth, Cigna, Humana and other insurers additionally offer their members discounts and rewards tied to activity trackers.

 

Even as activity trackers have provided impetus for some corporate employees to prioritize their health, the practice of incentivizing with them has, in some ways, heightened the tension between personalized medicine and private information. Workplace wellness programs that are offered by group health plans to group health plan participants only are covered by Health Insurance Portability and Accountability Act (HIPAA) privacy and security rules, while wellness programs offered to all employees, however, are likely not covered by HIPAA.

 

Just last week we reported on a new ruling from a federal district court in Washington, D.C., in which the U.S. Equal Employment Opportunity Commission (EEOC) has been ordered to alter its rules on employer-sponsored wellness programs that financially penalize employees who refuse to provide personal medical and genetic information. As wearable healthcare technology grows more sophisticated, we suspect that the number of questions it raises will continue to grow, as will the opportunities it creates.

 

For more on the role of smartphones and apps in personal health management, read our blog about trends in remote health monitoring.