Republicans in Congress are moving
quickly to replace all or major parts of Obamacare, and health savings accounts
are expected to become a centerpiece of managing health care-related expenses
going forward.
As part of the campaign to
increase the use of HSAs as a vehicle for reducing out-of-pocket health care
costs, some financial advisers believe annual contribution limits could be
raised, which could make them more attractive as financial planning vehicles.
Senate Republicans took a major
step in the direction of reforming Obamacare on Thursday through a budget
outline that would favor the use of HSAs as a means helping consumers adjust to
changes in the health care law.
Based on the various proposals
for replacing the 2010 Patient Protection and Affordable Care Act, many believe
HSAs will be heavily leveraged to soften the blow and help sell any changes to
the public.
Even without any changes to the
current law, HSAs present a so-called triple-tax advantage in that money is not
taxed when added to an account, it grows tax-free, and is not taxed when used
for qualified medical expenses.
The current rules allow
individuals to contribute up to $3,400 annually to an HSA, up $50 from 2016. For
families, the annual maximum is unchanged at $6,750. There is also a catch-up
provision that enables those 55 and older to save an additional $1,000
annually.
“Health savings accounts have
been a part of the GOP plan all along, because they are under the impression
that if people have high deductible plans and have more control over their
medical expenses, they will shop around for better prices,” said Carolyn
McClanahan, director of financial planning at Life Planning Partners.
While Ms. McClanahan is fan of
HSAs and recommends that her clients contribute the maximum allowed on an
annual basis, she doesn't believe HSAs will have an impact on driving down
health care costs.
“It's a good idea in theory, but
the idea of shopping around for better prices is only useful for elective
care,” she said. “For most run-of-the-mill care you don't have the option of
shopping around.”
But while she doesn't believe a
greater emphasis on HSAs is the answer to all that ails health care reform — and
re-reform — Ms. McClanahan does believe financial advisers should be
well-versed and ready to help their clients take advantages of the renewed
focus on HSAs.
“Health savings accounts work
great for people with money and wherewithal, and we don't see them going away,
which is why advisers who don't know about them already should learn about
them,” Ms. McClanahan said.
While the accounts are designed
to help individuals sock away money for medical expenses, Ms. McClanahan
advises her clients to invest any money once the account grows beyond a few
thousand dollars that might be needed for a medical emergency.
And in order to keep that money
invested, she reminds clients that they can pay out-of-pocket now and save the
receipt to reimburse themselves at some point in the future from their own HSA.
“There's no time limit on how
long you can save a receipt,” she said. “The caveat is, financial planners are
good at learning rules and helping clients exploit the rules, but the IRS is
good at changing rules that are being taken advantage of.”
Mr. West believes the push by
Republicans toward a more consumer-driven health care system will continue to
raise the profile of HSAs, eventually leading to higher annual contribution
limits.
“I think it will be hard to sell
a repeal if it doesn't, at least on first blush, look like everyone is in the
same place they were before," he said. "So with deductibles going up,
and premiums going down, you have an opportunity to save money through a health
savings account.”
Click
here for the original article from Investment News