September 24, 2020

HSAs: A smart way to manage health care dollars

All of Purdue’s consumer-driven health plans (CDHPs) offered for 2021 also come with a health savings account (HSA) offer to help manage out-of-pocket expenses for those who are eligible to participate.

KEY THINGS TO KNOW ABOUT HSAS

Triple tax advantage: An HSA is a smart way to save for health care costs now and in the future. Employees may contribute to their HSA with pre-tax dollars deducted from their paycheck each pay period—this allows employees to lower their current taxable income at the same time they are saving for health care needs. Interest earned over time continues to grow tax-free. Tax-free withdrawals also may be made to cover qualified medical expenses, now or in the future—even in retirement.

Choice is yours: Employees decide how much to contribute—and can change that amount any time during the year—as long as the amount stays within the annual limits set by the IRS. As employees decide how much to contribute to their HSA, it’s helpful to consider expenses throughout the year. Services such as prescriptions, sick visits and non-preventive lab expenses can cost just a little less if paid with funds that are never taxed.

Purdue helps, too: Purdue also make contributions, giving employees a start toward budgeting their out-of-pocket expenses. Purdue makes two types of contributions based on your medical plan coverage:

  • Base Contribution
    • Automatic contribution when you elect an HSA of $325 individual (employee only) or $650 family (employee +1 or more).
    • Deposited in January 2021.
  • Healthy Boiler Wellness Program
    • Contribution made if you meet program requirements. Up to $325 individual (employee only) or up to $650 family (employee +1 or more).
    • Deposited monthly following the month in which activities are completed

Always yours: HSAs are owned by the employee. Unused funds roll over year to year and always belong to the employee, even if they leave Purdue. Funds also pass on to a beneficiary in the event of death.

HOW TO GROW AN HSA NEST EGG

For some, the challenging part of using an HSA is that the funds are only available as they are deposited. That’s why it’s important to build up a nest egg. Two things employees can do to build up their HSA:

Contribute any savings from your new CDHP premium to your HSA. For example, on the existing PPO plan, an employee with family coverage and annual income under $45,500 pays $4,521.96 in annual premiums. In 2021, the annual premium costs will be lower in comparison. Because the employee is already accustomed to paying that amount, they could consider reallocating the premium difference into an HSA in order to build up a nest egg:

 

Medical Plan

2021 Annual Family Premium Savings to Contribute to HSA
Premier

$1,962.24

$2,559.72

Standard

$825.00

$3,696.96

Limited

$212.52

$4,309.44

 

Participate in the Healthy Boiler Wellness Program to earn financial incentives for completing an annual physical and/or providing a biometric screening. Participating in the Healthy Boiler Wellness Program can add up to another $325 (individual) or $650 (family) in an HSA.

HOW CDHP PLANS AND HSAS CAN WORK TOGETHER

From the example above, a family moving from the PPO plan to the Standard Plan (under $45,500 salary tier) for 2021 will save $3,696.96 in annual premiums.

In 2021, the family has $4,000 in medical expenses from a few office visits, prescriptions, labs, a couple urgent care visits and an outpatient diagnostic test. But both employee and spouse participate in the Healthy Boiler program, earning the full HSA contribution from Purdue: $650 base + $650 Healthy Boiler incentive = $1,300. In summary, $4,825 costs vs $4,996.96 HSA contributions.

The base contribution from Purdue, as well as the employee’s decision to contribute the premium savings and participate in the Healthy Boiler program not only ensure they have enough to cover their expenses for the year—but it leaves a little extra in their HSA for the start of the next year.

WAYS TO BEST USE AN HSA

  • Use the Center for Healthy Living for free preventive and $25 office visits.
  • Use HealthSync providers for the greatest benefit levels.
  • Use your primary care physician whenever possible, then urgent care when the physician is not available or you need services beyond what the physician can provide. Reserve the ER for serious needs like broken bones, head injuries, life threatening situations.
  • Work with your physician and Rx Savings Solutions to ensure you are getting appropriate medications at the most cost-effective prices.
  • Use Tier 1 Lab providers.

RESOURCES

MORE INFORMATION

Contact the HR Service Center at hr@purdue.edu or call 765-494-2222 or toll-free at 877-725-0222.


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