My first real job with benefits was working at a design firm as a courier. With the internet still in its infancy, we had to deliver files to our customers and this is where I came in. It was a fun, entry-level job that allowed me a backdoor to eventually become a designer.
One of the neat things about working at this firm was its small, family-feel. Everyone seemed to work well together and had a good time doing the work.
Looking back, a unique perk of the job was the health insurance plan we received. While I thought it expensive at the time, I paid something like $50 every paycheck to be fully covered for health insurance.
That's right, 100%, full coverage.
Today, this type of coverage is virtually extinct and if you have something close to it (like I'm fortunate to have at my current workplace), count it a blessing.
Healthcare is just getting too expensive and so many employers are trying to shift more of the burden back on to the employee. One of the ways employers are doing this is through higher-deductible health care plans (also called HDHP).
What is a Health Savings Account (HSA)?
As a result of these higher-deductible plans, health savings accounts were created in 2003 so individuals could “receive tax-preferred treatment of money saved for medical expenses.”
There are other vehicles people can use to put money away that have tax advantages, like the flexible savings account (FSA) and health reimbursement account (HRA).
The advantage of the HSA is an individual owns this account and it can accumulate from year-to-year while earning interest. With the FSA, the pre-determined funds must be used up in that calendar year. (Though new tax rules allow individuals to roll-over up to $500 from the previous year).
For my family, we have used an FSA as a way to get some extra tax savings – even though I've never liked their rigidity and “on-credit” premise.
Is an HSA for you?
Personally, I would say most of us could use an HSA or FSA for getting little extra tax savings when we pay for medical expenses. It's almost like having a discount card when you pay the co-pay, or pick-up your prescription because these costs are now tax-advantaged through an HSA or FSA.
Paying for healthcare costs with your HSA saves you 25%* off the retail cost using the benefits of tax-free contributions and withdrawals. *25% assumes combined state and federal income taxes of 25% or more. (From Lively)
To enroll in an HSA, you'll need to be a part of a high deductible health plan (HDHP).
And, there are some IRS considerations:
Based on 2019 IRS specifications, qualifying HSA health plans must have minimum deductibles of $1,350 for individuals and $2,700 for families. In addition, qualifying plans must have maximum out-of-pocket amounts of less than $6,750 for individuals and $13,500 for families.
Annual HSA contribution limits for 2019 are $3,500 for individual coverage and $7,000 for family coverage. If you have a mid-year change – like moving from self-only coverage to family coverage, or vice versa, then your annual contribution limit changes.
Where can you get an HSA?
You'll either fall into one or two categories when it comes to an HSA. Either your employer will have a plan all set-up for you to sign-up for or you can open one up at your place of choosing.
One place to consider is, Lively. We heard about them a couple of months ago and they offer individual HSA plans OR will help employers looking to offer their staff HSA plans.
A few things that set them apart are:
- No monthly fees just to have an HSA
- Free for individuals & families
- FDIC insured, interest-bearing
- Free to access investments (optional)
They also have a slick, quick(er) sign-up process which takes about 5 minutes or less.
Users can also choose to sign-up for a TD Ameritrade account to invest funds there – 100% free. I think this is one of the more unique features of Lively. Add to that, the fact that all of one's growth, is tax-free.
An HSA offers the ability to keep the money that you have in the account. This money also earns interest while it sits there. So, not only are you getting tax advantages to the savings, it is earning interest AND (if you choose) through how you invest it.
Pretty slick.
Do you have an HSA account?
I'd be interested to know if you have an HSA account and how it has benefited you and if you'd recommend it to others? OR – if you've tried them / have an account – what your experience with Lively is?
Update 4/12/19: Lively now has a working iOS app! (Android version still in the works).
Update 8/1/19: What's eligible for your HSA? Wageworks provides a helpful list.
Update 9/10/19: Android app for Lively has been launched.
This post was brought to you by Lively. All opinions expressed are our own. TTG may earn a commission on any accounts opened up via the links on this page, at no cost to you. Thanks for helping to support the website.
Lively HSA
$0 for Individuals/Families, 2.95/mo for Employers Pros
- Zero fees to get started as individual
- Earn interest
- Tax-advantages
- Tax-free growth on investments
- Easy sign-up
Cons
- Money can be used for medical expenses only
- Only for individuals with HDHP
6 Comments
You say Lively is free, but your graphic shows $0-$2.95/mo with no explanation as to how $2.95/mo is not free. Please explain instead of posting a contradiction. $2.95 isn’t free.
A few things that set them apart are:
No monthly fees just to have an HSA
Free for individuals & families
FDIC insured, interest-bearing
Free to access investments (optional)
Great catch! Lively is free for individuals and families. We’ve updated the graphic to show that $2.95 is the amount employers pay to offer an HSA plan to their employees.
Have you seen stand alone HSA’s for dental expenses or do you need to purchase dental insurance and then you are allowed to set up a HSA?
Good question Jo. Got this from others asking similar questions online – and sounds like you can use an HSA for dental expenses:
The IRS will allow HSA payments for “diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” As long as the expenses are not eligible for reimbursement through insurance or other sources.
From IRS publication 502: ” Dental Treatment: You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments.”
The general rule of thumb is so long as an expense is not cosmetic in nature but rather medically necessary, then the expense would be considered eligible. For example, a bone graft could be eligible if it is medically necessary whereas teeth whitening isn’t eligible because it is seen as a cosmetic improvement.
Hope this helps.
I’m seeing a frequent comparison of Lively and Fidelity when it comes to HSA. They seem to have pretty similar features, but would you suggest one over the other? If so, why?
Thanks for the question, Minoru. Really, all HSA’s function similarly. According to Lively, “HSA’s are triple tax advantaged savings accounts that house funds that can either be invested or used for eligible medical expenses (or some combination of both).” That said, Lively boasts of doing one thing well and one thing only: HSAs. So, their interests aren’t divided. While Fidelity may offer a one “package” solution (where you don’t have a multiple accounts – if you were to invest w/ your Lively HSA through TD Ameritrade), they offer zero fees. Hope this helps.