‘Tis the season of open enrollment and if you are like me, you’re trying to figure out what you’re going to do about your health insurance for the coming year. On top of choosing the right coverage, you also have to decide what additional health savings plan works best for your situation.
Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRA), and Flexible Spending Accounts (FSAs) are gaining popularity with employers (especially employers with younger and healthier workforces).
Many companies are offering their workers the option of enrolling in an HSA or similar account instead of the usual HMO or PPO.
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The Health Savings Account (HSA)
An HSA gives you a tax-exempt savings account to pay for your own healthcare expenses. They are different and operate differently than how other online savings accounts work.
The money you don’t spend in one health plan year rolls over to the next.
You are also enrolled in an HDHP (High Deductible Health Plan), in which your insurance company will only pick up the tab for major healthcare expenses (including types of preventive care, maternity care, and pediatric primary care).
HSAs have risen in popularity because of low premiums. In a traditional insurance plan, you pay high premiums up front; in the HDHP, you pay lower premiums and essentially assign the savings to your own healthcare expense account.
HSA Contribution Limits
For 2024, individuals can now put up to $4,150 per year in an HSA, and families $8,300 per year. The money grows tax-deferred and distributions are tax-free (if they are used to pay for qualified medical expenses).
While the $50 self-contributing and $100 family contribution increase year-to-year might seem minor, they increase your savings account with a barely noticeable rise in your contributions.
For 2024, the minimum deductible permitted on an HDHP will remain at $1,600 for individuals and $3,200 for families. The maximum out-of-pocket limit is $8,050 for individuals and $16,100 for families.
You can even invest in HSA assets. If you’re 65 or older, you may withdraw money from an HSA for any reason without tax penalty.
The Health Reimbursement Account (HRA)
While an HRA is a tax-advantaged account like an HSA – the account savings grow with time – the assets in an HRA don’t belong to you. They belong to your employer, and they revert back to your employer when you leave your job.
The HRA is essentially a favor your employer does for you – a reimbursement account rather than a true “asset” in your possession.
The Flexible Spending Account (FSA)
With an FSA, you deduct pre-tax dollars from your salary to pay qualified medical expenses. You can designate an FSA for your own health care expenses or for those of a dependent.
For 2024, the maximum employee contribution to an FSA is $3,200. If your plan allows carryovers, you can carry $610 forward from 2024.
But, most FSAs are “use it or lose it” – at the end of the plan year, the money left in the account doesn’t roll over into the next year. Employees tend to minimally fund FSA’s, as a result, although they can be used in conjunction with HRA’s.
Medi-Share Accounts
There has been a new healthcare alternative entering the market in the last several years, like Medi-Share. The idea of these cost-sharing programs is simple.
Every month, members pay a contribution into a savings account. When a member of the program has medical bills, they submit a request to have those bills covered by the money in the accounts. If it’s approved, those bills are paid from other members’ savings accounts.
Just like with a traditional health insurance plan, there is a set amount you’ll be required to pay before the plan kicks in.
In the case of Medi-Share, there is an amount you’ll have to pay out-of-pocket before you can submit a request for assistance. This limit could be anywhere from $500 to several thousand dollars.
One of the most notable advantages of participating in Medi-Share is it can be much more affordable than the alternatives. You can base your monthly contributions based on the benefits of the program you need for your family.
It’s not health insurance, but it can help combat the expensive costs of healthcare which could drain your bank account if you’re not careful.
Choosing the Right HSA Account for You
If your employer doesn’t offer an HSA account option, it’s your duty to find an account. If you have a health insurance plan with a high deductible, then you may qualify to open one of these accounts.
Just like with every other major purchase or investment, it’s vital you do some comparison shopping before you pick one of them.
Every HSA administrator is going to have various fees and policies. There are several various factors you’ll need to account for when looking for the best health savings account.
One of the first factors to look at when shopping around for an HSA account is the fees. Some accounts have monthly fees while others only charge fees per transaction. Some companies have fees to open an account or to transfer money to an account.
Just like a traditional checking account, some banks are going to charge you at the drop of a hat, while others don’t charge a monthly fee.
The next most important thing to compare is the investment options. Some HSAs are basically a savings account, while others have investment options.
If the account is a savings-type account, then it will be insured by the FDIC. However, if it’s an investment account, it probably won’t have any protection.
How do you want to access your account? Most accounts have checks or a debit card you can use for medical expenses.
They make it very simple to use your money. Other accounts (most older ones) require a disbursement and reimbursement form, which can be annoying for a lot of account holders.
Best HSA Accounts
There are dozens of different places where you can open your HSA account. I have only included three of them on this list. If none of these suit your needs, don’t worry, there are plenty of other options. This will hopefully give you an excellent place to start your search.
Lively HSA
The reason Lively is the first on our list is because they have no monthly fees. Also, they don’t have any opening fees. Although, if you decide to use the TD Ameritrade, you will pay a whopping $2.50 fee every month.
While speaking of fees, you’ll face fewer of them with Lively.
They don’t charge fees for using your debit card, accessing statements, over-contributing to your account, and several others.
HSA Bank
HSA Bank tends to be one of the best options. There are several reasons HSA continues to rise to the top. One of those is their low monthly maintenance fees. They only charge $2.50 a month, which is much lower than most other banks on the market.
You can get the fee waived if you have a balance over $5,000. Additionally, there are no set-up fees, but there are a few banking fees, most of which you can easily avoid.
Another advantage of HSA Bank is its investment options. They have a self-directed option through Ameritrade. You can choose some of their pre-selected funds with no trading fees.
Health Savings Administrators
Health Savings Administrators started in 1996 when they were a medical savings account administrator. In 2004, after the passing of legislation, they switched to health savings accounts. Currently, they have over $700 million in investments from clients across the country.
They don’t require a minimum balance or have an opening fee, but they do have a $45 annual fee. One of the advantages of Health Savings Administrators is their many investment options.
Best HSA Accounts Comparison
| HSA Provider | Key Fee Benefits | Investment Options |
|---|---|---|
| Lively HSA | No Monthly Fees, Low $2.50 TD Ameritrade Fee | No Trading Fees, No Minimum Balance |
| HSA Bank | Low $2.50 Monthly Fee (Waived With $5,000+ Balance) | Self-Directed via Ameritrade, Diverse Options |
| Health Savings Administrators | $45 Annual Fee, No Minimum Balance Requirement | Wide Range of Investment Choices With $700M+ in Assets |
Bottom Line: Choosing Your Ideal Health Savings Plan
Choosing the right health savings plan during open enrollment is crucial.
Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), and Flexible Spending Accounts (FSAs) offer different benefits, with HSAs pairing with High Deductible Health Plans (HDHPs) and providing tax-exempt savings, HRAs being employer-controlled, and FSAs offering pre-tax savings but having a “use it or lose it” feature.
Additionally, Medi-Share provides a cost-sharing approach to medical bills. When considering an HSA, evaluate fees, investment options, and accessibility.
Notable HSA options include Lively HSA, HSA Bank, and Health Savings Administrators. Consulting a financial or insurance expert can guide you in making an informed decision.
