What is a Health Savings Account?
A health saving account (HSA) is a savings account in which money can be set aside for certain medical expenses. HSA accounts work only with high deductible health insurance plans and are tax-exempt.
HSA accounts help pay for deductibles, coinsurance, copayments and other medical expenses. Once the money is deposited into the HSA account, you can withdraw it for any medical expense, also tax-free.
Additionally, you can earn interest, your balance carries over each year and can also be invested and can also be invested into a retirement fund. As you get close to aging into Medicare, it’s important to understand how HSA works with Medicare.
How HSA Works with Medicare
With more and more seniors working later in life, there’s the chance of them having employer offered health benefits. If they work for a large company, the group benefits have the potential of being HSA compatible.
Some companies offer to contribute to the employee’s HSA account as long as that’s the only insurance the employee carries.
Unfortunately, there are some restrictions that come along with having an HSA account and how HSA works with Medicare. If you choose to enroll in Medicare Part A or Medicare Part B, or if you enroll for social security benefits, it’s considered illegal to continue to contribute to an HSA account.
The only exception to continue with your HSA account is postpose enrolling in Traditional Medicare. You have the option to do so without penalty up until retirement.
Medicare will not charge the late enrollment penalty so long as you continue on with group health benefits primary to Medicare.
If by chance you already enrolled for Medicare Part A or social security benefits, you can put a stop on your application. If you decide to go through with either benefit, you can keep the funds accrued into your HSA account.
The remaining amount can be used towards any of your healthcare costs associated with Medicare.
To put it simply, Medicare and HSA accounts just aren’t compatible. If you have group health insurance with an HSA account, make sure to do research prior to enrolling in any of the Traditional Medicare benefits.
Deciding on HSA VS. Medicare
Working seniors will want to know which route to go when considering Medicare versus keeping their existing HSA account. There are a variety of components you’ll want to consider when making the decision of which insurance you’ll ultimately end up choosing.
First, look at your deductible. If you’re deductible with your large group health insurance policy is $2,600.00 or greater, the out of pocket costs will obviously be extensive.
With Medicare Part A (hospital benefits), the Part A deductible is lower, in which case your out of pocket expenses would be significantly lower.
A spouse may continue on with their HSA while the other spouse has Medicare, without penalty. Anyone, not just the employer, can contribute into the active HSA account, up to the IRS allowed limits.
You both can make contributions into the HSA account despite one spouse having the government funded health insurance.
Using HSA for Spouse and/or Dependents
Any money in the HSA account can be used not just for the account holder, but also the spouse or any dependents
Any remaining money is an HAS account, once you’ve applied for Medicare benefits, can still be used towards any healthcare costs and retirement benefits.
You may still be hit with the Medicare Part D penalty. Most high-deductible health plans don’t have prescription drug coverage as much as a Medicare Part D Plan covers.
If your group health benefits don’t provide the coverage that Medicare Part D would consider credible, you may get forced into getting a Medicare Part D Plan that you didn’t intend on having.
If you’re required to get Medicare Part D due to incredible coverage, failing to enroll for Medicare Part D during the Annual Enrollment Period (AEP), you will get stuck paying the penalty.
The Medicare Part D penalty charges you a % for every month you went without Part D benefits.
You’ll want to thoroughly consider both options before deciding which route to go. Depending on your finances and individual healthcare needs will determine which is the best route to go.
For more information regarding the benefits of Medicare and HSA accounts, you can contact our insurance agents. The can answer any questions you may have and give you the information needed to make an educated decision.
Additional Medicare Help
Your Medicare Part A benefits are your hospital benefits and your Medicare Part B is your outpatient benefits. Regardless of whether you’re using your Medicare Part A or Medicare Part B insurance, both are only covered at 80%.
While 80% seems like plenty, that’s not factoring in deductibles, copayments and coinsurance.
Additionally, Traditional Medicare doesn’t offer prescription medication benefits, so a Medicare Part D Plan (Prescription Drug Plan) is necessary. You can purchase a Part D Plan from the individual insurance carriers in your area.
Between a Prescription Drug Plan and all the other out of pocket costs not covered by Traditional Medicare benefits, the amount quickly adds up. We can help with some of the ever escalating out of pocket costs.
If you decide to go with Traditional Medicare as your primary insurance, you can purchase additional healthcare benefits.
Medicare Supplement Plans can also be purchased through your local insurance companies. Medicare Supplement Plans were made to work alongside Traditional Medicare benefits and provide coverage for things like deductibles, copayments, coinsurance and other healthcare costs not covered by Traditional Medicare benefits.
With seniors, whether working or on a fixed income from social security, every penny counts. With each year bringing escalating healthcare costs, obtaining a Medicare Supplement Plan is becoming more and more necessary.
Call us today for more information on the various types of Medicare Supplement Plans. You can also fill out our online forms for plan comparison and pricing. We are dedicated to giving you the best healthcare coverage at the lowest prices. Our agents are available for your healthcare needs so don’t hesitate to contact us today!