October 25, 2023 • 14 mins
We continue to explore programs that can help you pay for medical expenses with pretax money. A Health Savings Account (HSA) has a higher deductible but has advantages for those with lower medical expenses. Our guest is Leanna from the Health Care Authority, who talks about the pros and cons of the program.
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Episode Transcript
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(00:05):
Welcome back to Fund Your Future with DRS.
And today we're kind of rolling into parttwo of talking about tax advantage
savings accounts that can help you payfor qualified medical expenses.
Today, we have Leanna from the Health CareAuthority here to talk about
HSAs, everyone'sfavorite subject, Health Savings Accounts.
(00:28):
So, Leanna,what is a Health Savings Account?
It’s a tax free savings accountyou can use to pay for qualified medical
expenses and is a feature of a qualifiedhigh deductible health plan.
Both you and your employer may contributetax free money into the savings account
to pay for IRS qualified medical expenses,
(00:49):
such as deductibles or co-insurance,and the maximum amount
that can be contributedeach year is set by the IRS.
Oh, that's great.
So in order to be eligibleto even participate in an HSA,
you have to be enrolledin a qualified, high
deductible health plan, also knownas a consumer directed health plan.
(01:12):
And there's a lot of words in there.
But briefly,
can you tell us a little bit aboutwhat is a consumer directed health plan?
Sure.
A consumer directed health plan isa qualified, high deductible health plan
with an HSA,a qualified health plan is a health plan
that typically coversthe same services as a PPO plan would,
(01:35):
similar to the UMP Classic
plan or a classic PPO plan.
However, the high deductible health planshave a different payment structure
and a higher deductiblefor covered services for a lower premium.
It has certain rules.
They have one combined deductiblefor medical and prescription services.
(01:58):
So rather than having two separatedeductibles, there's one.
And every member who is enrolledin the high deductible health plan
must meet that combined deductiblebefore the plan
will start paying for services,including prescription drugs.
Certain covered
preventive care servicesand covered insulins
(02:21):
are not subject to the deductible,which means the plan will pay
for some servicesbefore you meet your deductible.
So why might someone sign up for an HSA?
Your employer makes a monthly contributionto your savings account.
So, on top of any contributionsyou may make,
(02:42):
your employer is also making contributionson your behalf.
So, together with your lower premiumand the contributions
your employer makes,it could be a very good choice for you.
Contributions can be made upto the annual maximum
contributions allowed by the IRS,and then once your account
(03:04):
reaches a certain dollar amount,you may invest that money.
So you do have investment opportunities,unlike the FSA.
So, right now the UMP plan allows members
to investwhen your savings account reaches $1,500.
And once your account reaches $1,500,then you can either allocate
(03:25):
how your investments goor you can choose to have somebody at
Health Equitydo that for you and manage your account.
Okay, that's really cool. Yeah.
And unlike FSA accounts, contributions
remain in your Health Savings Accountuntil you use them.
The entire balance rolls overfrom year to year
(03:46):
and members can take that accountall the way into retirement.
You don't have to spend it down.
It can just continue to build.
Oh, that's awesome.
Yeah, I think that's, like you said,kind of the main takeaway of why someone
would maybe pick a Health Savings Accountis that they can rollover that balance.
That's really great.
(04:06):
Even when you're planning for expenses,medical expenses in retirement. Yes.
And you cannot enroll in both an HSA
and an FSA at the same time.
It's either one or the other.
And so if you enroll in a high deductiblehealth plan with an HSA, whether you're
(04:29):
through PEB on the consumer driven healthplan or SEBB on the high deductible plan,
if you choose to enroll in those plans,you cannot roll enroll into a medical FSA.
You can enroll in a limited FSA,
which we also have availablethrough the Health Care Authority,
and that will be used for your vision
(04:49):
and dental qualified expenses only.
Yeah, but I think this is definitelya really great option for folks to be able
to pay for those medical expensesto roll that over.
And like you said, maybeif you're getting closer to retirement
and you're a couple of years outand you want to start putting money away
into a specific, again,tax free account for your medical expenses
(05:13):
in retirement, this is a great waythat you can do that. Yes.
And then so once you have the moneyin the account in your HSA,
how does someone go about using that moneythen to pay for those medical expenses?
They are sent a debit cardby Health Equity that they can use either
at their provider's officeor at the pharmacy they use,
(05:35):
or they can also log onto Health Equity's website
and that shows them what their balance isin their Health Savings Account.
And they can also, if they're enrolled in,or logged into their Regence account,
there's a single sign onso that they can select
(05:55):
Health Equitythrough their Regence account
and go directly to their HealthSavings Account information as well.
And by accessing their HealthSavings Account,
they can pay any outstanding claims
from the websiteso they can access their money
through their debit cardor by going online and sending a request
(06:18):
for Health Equity to send their payment
to whicheverprovider has an outstanding claim.
Gotcha.
So like you said, very similar to FSA.
You can either get a debit cardor you can file a claim.
And you can go on through your account.
Yeah, I think, again,kind of the main difference
also is the vendor.
(06:38):
For the Health SavingsAccount, it's Health Equity
and for FSA, it'sNavia Benefits Solutions.
Perfect.
So, HSAsounds like a really great program.
You can rollover your money,you can just keep rolling
that over every yearand then continue to use it in retirement.
It's almost like a little retirementfund for your health care.
(07:01):
Yes, you can use it for that.
Absolutely. Yeah.
So are there any downsidesto participating in an HSA?
Well, I think some things to consideris that these accounts
are not funded upfront like an FSA is.
That means that you must have the fundsin your savings account to use that money.
(07:22):
So, even if you've elected to contribute
$2,000 to your Health Savings Account,but you only have $1,000 in there
in January,you can only use that $1,000 in January.
It's not front loaded like the FSA is.
And also one thing to keep inmind is before
(07:45):
you enroll in a high deductible healthplan with an HSA,
you really want to evaluatewhat your health care expenses are.
And if you spend more annually,then you're going
to receive in contributionsor more than your annual deductible
or coinsurance and co-payments.
(08:06):
This may not be a good plan for you
since you have to pay the entire combineddeductible before the plan starts to pay.
You'll be paying your savingsaccount down every year in that scenario.
And so I think a wise decisionwould be to calculate
how much you spend annuallyin your medical expenses.
(08:28):
On average, if you are very healthyand you're not concerned
with spending a lot of money,this could be a good option for you
because it will allow youto build your savings account
since you don't have a lot of moneygoing out in expenses.
And I think the key difference too,between an HSA and an FSA
(08:53):
is that the employer typically makes
a contribution toward the HSA account.
So, an employee wouldn't
necessarily have to make any contributionsif they didn't want to.
Because if you are a state employee,the contribution amount varies
from year to year and that is set asidein the open enrollment materials.
(09:15):
And the employer contribution variesdepending on
if you are a single personenrolling in an HSA or a family enrolling.
And so, your employer will contributea certain dollar
amount each year into your HealthSavings Account.
So, you can just plan on thatif you want to and not have to make
(09:36):
additional contributions.
Yeah, well
I really love this ideaof being able to roll over the funds.
I have to say that personally, it'ssomething that I never really considered
too much before of having a HealthSavings Account.
I personally,I consider myself a pretty healthy person.
I only go into the doctormaybe once or twice a year for a checkup.
(09:57):
And so, I didn't feel like putting moneyinto account,
taking that away from my paycheck.
But like you said, if it's something thatmy employer contributes to the account,
that could be really helpfulin the future.
Yes, exactly.
In your situation, the high deductiblehealth plan is a great option for you
because you don't havea lot of medical expenses
(10:21):
and your employer for a single employee,they contribute
$700.08 per year.
And for a family they contribute $1,400.04
for one or more peopleenrolled in the plan per year.
And so, those contributionsare going into a Health Savings Account.
(10:42):
And if you do happen to get sick,
you will pay that entire doctor billuntil you meet your deductible.
So, the money that is contributedcan be used to pay that doctor bill.
But at the same time
you have your preventive care servicesthat are available to you
paid upfront at 100% of the allowed amount
(11:05):
before you have to meet your deductible.
So if you go in for your routine examevery year,
you know that that's going to be covered
and you don't have to worryabout those out-of-pocket expenses.
So it's definitely a good optionfor someone like you
who doesn't maybe go to the doctora whole lot, but you still want to go in
for your routine examsand make sure that you're healthy.
(11:28):
I want to be careful
about I don't want to discourage anybodyfrom going to the doctor.
It's important to go to the doctor.
And you may have a situationwhere you enroll in
a high deductible planwith the Health Savings Account.
And then we have these unfortunate folkswho maybe get
a diagnosisthat will create a lot of office visits.
(11:50):
And in those circumstances,you just have to know that that's
one of the risksthat you take by enrolling in this plan.
And you do have an annual openenrollment every year
and you can switch plans again,if that's the case
and you have ongoing treatmentthat's needed.
So if I did getsort of a terminal illness,
a terminal diagnosis or somethingthat was more serious, that would cost me
(12:14):
more medical bills, then I could go aheadand re-enroll in that fall time.
Yes. During open enrollmentand then switch to like a PPO type plan.
With a lower deductiblethe following year.
But in the meantime, you still dohave those employer contributions
and you still do have the maximumdeductible before the plan starts to pay.
(12:35):
And you also have an annual maximum amountthat you pay every year.
So once you reach that threshold,the plan starts to pay at 100%.
So there are safeguards in this plan
for that situation,but you will be paying more
out of your pocket than anticipatedif that happens after you enroll.
(12:56):
Sure.
So where would a persongo to learn more about this?
They can
certainly go to the HCA websiteduring open enrollment.
We have dedicated pagesfor both PEBB and SEBB programs.
They can also go to their payroll
and benefits team through their employer.
(13:17):
They may contact HealthEquity directly or also,
I always encourageeverybody to look at their
CDHP certificate of coverageor that's for PEBB.
And for SEBB it's the High Deductible Plancertificate of coverage.
That goes into a lot of detailabout the plan
(13:37):
and what they can and cannot do.
It also at the front of the certificatesof coverage has contact information
not just for Health Equitybut for the medical plan.
And if they have any coverage withhow the two work together, the dedicated
customer service team can help themand answer their questions.
Well, LeannaI really appreciate your insight today.
(13:58):
Happy to be here.Thank you for inviting me.
Yeah. Thank you so much.
Thanks for listening.
And now we'd love to hear from you.
What topics would you like to hear about?
What questions do you have for us?
Send an email to drs.podcasts@drs.wa.gov
that's drs.podcasts@drs.wa.gov.
(14:19):
The Department of Retirement Systemsprovides this podcast as a public service,
but it's neither a legal interpretationnor a statement of DRS policy.
References to any specific productor entity do not constitute
an endorsement or recommendation.
The views expressed by guests are theirown, and their appearance on the program
does not imply an endorsement of themor any entity they represent.
Views and opinions expressed by DRSemployees are those of the employees
(14:41):
and do not necessarily reflect the view ofDRS or any of its officials.
Welcome back to Fund Your Future with DRS.
And today we're kind of rolling into parttwo of talking about tax advantage
savings accounts that can help you payfor qualified medical expenses.
Today, we have Leanna from the Health CareAuthority here to talk about
HSAs, everyone'sfavorite subject, Health Savings Accounts.
(00:28):
So, Leanna,what is a Health Savings Account?
It’s a tax free savings accountyou can use to pay for qualified medical
expenses and is a feature of a qualifiedhigh deductible health plan.
Both you and your employer may contributetax free money into the savings account
to pay for IRS qualified medical expenses,
(00:49):
such as deductibles or co-insurance,and the maximum amount
that can be contributedeach year is set by the IRS.
Oh, that's great.
So in order to be eligibleto even participate in an HSA,
you have to be enrolledin a qualified, high
deductible health plan, also knownas a consumer directed health plan.
(01:12):
And there's a lot of words in there.
But briefly,
can you tell us a little bit aboutwhat is a consumer directed health plan?
Sure.
A consumer directed health plan isa qualified, high deductible health plan
with an HSA,a qualified health plan is a health plan
that typically coversthe same services as a PPO plan would,
(01:35):
similar to the UMP Classic
plan or a classic PPO plan.
However, the high deductible health planshave a different payment structure
and a higher deductiblefor covered services for a lower premium.
It has certain rules.
They have one combined deductiblefor medical and prescription services.
(01:58):
So rather than having two separatedeductibles, there's one.
And every member who is enrolledin the high deductible health plan
must meet that combined deductiblebefore the plan
will start paying for services,including prescription drugs.
Certain covered
preventive care servicesand covered insulins
(02:21):
are not subject to the deductible,which means the plan will pay
for some servicesbefore you meet your deductible.
So why might someone sign up for an HSA?
Your employer makes a monthly contributionto your savings account.
So, on top of any contributionsyou may make,
(02:42):
your employer is also making contributionson your behalf.
So, together with your lower premiumand the contributions
your employer makes,it could be a very good choice for you.
Contributions can be made upto the annual maximum
contributions allowed by the IRS,and then once your account
(03:04):
reaches a certain dollar amount,you may invest that money.
So you do have investment opportunities,unlike the FSA.
So, right now the UMP plan allows members
to investwhen your savings account reaches $1,500.
And once your account reaches $1,500,then you can either allocate
(03:25):
how your investments goor you can choose to have somebody at
Health Equitydo that for you and manage your account.
Okay, that's really cool. Yeah.
And unlike FSA accounts, contributions
remain in your Health Savings Accountuntil you use them.
The entire balance rolls overfrom year to year
(03:46):
and members can take that accountall the way into retirement.
You don't have to spend it down.
It can just continue to build.
Oh, that's awesome.
Yeah, I think that's, like you said,kind of the main takeaway of why someone
would maybe pick a Health Savings Accountis that they can rollover that balance.
That's really great.
(04:06):
Even when you're planning for expenses,medical expenses in retirement. Yes.
And you cannot enroll in both an HSA
and an FSA at the same time.
It's either one or the other.
And so if you enroll in a high deductiblehealth plan with an HSA, whether you're
(04:29):
through PEB on the consumer driven healthplan or SEBB on the high deductible plan,
if you choose to enroll in those plans,you cannot roll enroll into a medical FSA.
You can enroll in a limited FSA,
which we also have availablethrough the Health Care Authority,
and that will be used for your vision
(04:49):
and dental qualified expenses only.
Yeah, but I think this is definitelya really great option for folks to be able
to pay for those medical expensesto roll that over.
And like you said, maybeif you're getting closer to retirement
and you're a couple of years outand you want to start putting money away
into a specific, again,tax free account for your medical expenses
(05:13):
in retirement, this is a great waythat you can do that. Yes.
And then so once you have the moneyin the account in your HSA,
how does someone go about using that moneythen to pay for those medical expenses?
They are sent a debit cardby Health Equity that they can use either
at their provider's officeor at the pharmacy they use,
(05:35):
or they can also log onto Health Equity's website
and that shows them what their balance isin their Health Savings Account.
And they can also, if they're enrolled in,or logged into their Regence account,
there's a single sign onso that they can select
(05:55):
Health Equitythrough their Regence account
and go directly to their HealthSavings Account information as well.
And by accessing their HealthSavings Account,
they can pay any outstanding claims
from the websiteso they can access their money
through their debit cardor by going online and sending a request
(06:18):
for Health Equity to send their payment
to whicheverprovider has an outstanding claim.
Gotcha.
So like you said, very similar to FSA.
You can either get a debit cardor you can file a claim.
And you can go on through your account.
Yeah, I think, again,kind of the main difference
also is the vendor.
(06:38):
For the Health SavingsAccount, it's Health Equity
and for FSA, it'sNavia Benefits Solutions.
Perfect.
So, HSAsounds like a really great program.
You can rollover your money,you can just keep rolling
that over every yearand then continue to use it in retirement.
It's almost like a little retirementfund for your health care.
(07:01):
Yes, you can use it for that.
Absolutely. Yeah.
So are there any downsidesto participating in an HSA?
Well, I think some things to consideris that these accounts
are not funded upfront like an FSA is.
That means that you must have the fundsin your savings account to use that money.
(07:22):
So, even if you've elected to contribute
$2,000 to your Health Savings Account,but you only have $1,000 in there
in January,you can only use that $1,000 in January.
It's not front loaded like the FSA is.
And also one thing to keep inmind is before
(07:45):
you enroll in a high deductible healthplan with an HSA,
you really want to evaluatewhat your health care expenses are.
And if you spend more annually,then you're going
to receive in contributionsor more than your annual deductible
or coinsurance and co-payments.
(08:06):
This may not be a good plan for you
since you have to pay the entire combineddeductible before the plan starts to pay.
You'll be paying your savingsaccount down every year in that scenario.
And so I think a wise decisionwould be to calculate
how much you spend annuallyin your medical expenses.
(08:28):
On average, if you are very healthyand you're not concerned
with spending a lot of money,this could be a good option for you
because it will allow youto build your savings account
since you don't have a lot of moneygoing out in expenses.
And I think the key difference too,between an HSA and an FSA
(08:53):
is that the employer typically makes
a contribution toward the HSA account.
So, an employee wouldn't
necessarily have to make any contributionsif they didn't want to.
Because if you are a state employee,the contribution amount varies
from year to year and that is set asidein the open enrollment materials.
(09:15):
And the employer contribution variesdepending on
if you are a single personenrolling in an HSA or a family enrolling.
And so, your employer will contributea certain dollar
amount each year into your HealthSavings Account.
So, you can just plan on thatif you want to and not have to make
(09:36):
additional contributions.
Yeah, well
I really love this ideaof being able to roll over the funds.
I have to say that personally, it'ssomething that I never really considered
too much before of having a HealthSavings Account.
I personally,I consider myself a pretty healthy person.
I only go into the doctormaybe once or twice a year for a checkup.
(09:57):
And so, I didn't feel like putting moneyinto account,
taking that away from my paycheck.
But like you said, if it's something thatmy employer contributes to the account,
that could be really helpfulin the future.
Yes, exactly.
In your situation, the high deductiblehealth plan is a great option for you
because you don't havea lot of medical expenses
(10:21):
and your employer for a single employee,they contribute
$700.08 per year.
And for a family they contribute $1,400.04
for one or more peopleenrolled in the plan per year.
And so, those contributionsare going into a Health Savings Account.
(10:42):
And if you do happen to get sick,
you will pay that entire doctor billuntil you meet your deductible.
So, the money that is contributedcan be used to pay that doctor bill.
But at the same time
you have your preventive care servicesthat are available to you
paid upfront at 100% of the allowed amount
(11:05):
before you have to meet your deductible.
So if you go in for your routine examevery year,
you know that that's going to be covered
and you don't have to worryabout those out-of-pocket expenses.
So it's definitely a good optionfor someone like you
who doesn't maybe go to the doctora whole lot, but you still want to go in
for your routine examsand make sure that you're healthy.
(11:28):
I want to be careful
about I don't want to discourage anybodyfrom going to the doctor.
It's important to go to the doctor.
And you may have a situationwhere you enroll in
a high deductible planwith the Health Savings Account.
And then we have these unfortunate folkswho maybe get
a diagnosisthat will create a lot of office visits.
(11:50):
And in those circumstances,you just have to know that that's
one of the risksthat you take by enrolling in this plan.
And you do have an annual openenrollment every year
and you can switch plans again,if that's the case
and you have ongoing treatmentthat's needed.
So if I did getsort of a terminal illness,
a terminal diagnosis or somethingthat was more serious, that would cost me
(12:14):
more medical bills, then I could go aheadand re-enroll in that fall time.
Yes. During open enrollmentand then switch to like a PPO type plan.
With a lower deductiblethe following year.
But in the meantime, you still dohave those employer contributions
and you still do have the maximumdeductible before the plan starts to pay.
(12:35):
And you also have an annual maximum amountthat you pay every year.
So once you reach that threshold,the plan starts to pay at 100%.
So there are safeguards in this plan
for that situation,but you will be paying more
out of your pocket than anticipatedif that happens after you enroll.
(12:56):
Sure.
So where would a persongo to learn more about this?
They can
certainly go to the HCA websiteduring open enrollment.
We have dedicated pagesfor both PEBB and SEBB programs.
They can also go to their payroll
and benefits team through their employer.
(13:17):
They may contact HealthEquity directly or also,
I always encourageeverybody to look at their
CDHP certificate of coverageor that's for PEBB.
And for SEBB it's the High Deductible Plancertificate of coverage.
That goes into a lot of detailabout the plan
(13:37):
and what they can and cannot do.
It also at the front of the certificatesof coverage has contact information
not just for Health Equitybut for the medical plan.
And if they have any coverage withhow the two work together, the dedicated
customer service team can help themand answer their questions.
Well, LeannaI really appreciate your insight today.
(13:58):
Happy to be here.Thank you for inviting me.
Yeah. Thank you so much.
Thanks for listening.
And now we'd love to hear from you.
What topics would you like to hear about?
What questions do you have for us?
Send an email to drs.podcasts@drs.wa.gov
that's drs.podcasts@drs.wa.gov.
(14:19):
The Department of Retirement Systemsprovides this podcast as a public service,
but it's neither a legal interpretationnor a statement of DRS policy.
References to any specific productor entity do not constitute
an endorsement or recommendation.
The views expressed by guests are theirown, and their appearance on the program
does not imply an endorsement of themor any entity they represent.
Views and opinions expressed by DRSemployees are those of the employees
(14:41):
and do not necessarily reflect the view ofDRS or any of its officials.
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