While healthcare costs remain top of mind for most Americans, finding options to reduce health spending is valuable for many. One of many changes in the One Big Beautiful Bill, more health plans are now compatible with health savings accounts (HSAs).
Here’s how you can drive HSA adoption and increase growth for your business while supporting your clients’ health outcomes.
What Are the New HSA-Eligible Health Plans?
Due to updates in the One Big Beautiful Bill, bronze and catastrophic marketplace health plans are now eligible to be paired with an HSA for savings and tax advantages.
Both of these plans qualify as high-deductible health plans (HDHP), for which beneficiaries trade lower premiums for higher out-of-pocket responsibility. HDHPs can be used to cover preventative care visits, surgery, prescription drugs, and more.
Make sure to review each plan’s Summary of Benefits to ensure specific coverages that are most important to your clients. The money enrollees don’t spend on premiums can be contributed to an HSA, which has numerous tax advantages.
For individuals under 65, a bronze or catastrophic plan can offer lower monthly premiums for marketplace clients who don’t qualify for cost-sharing reduction (CSR) subsidies or are looking to save.
Individuals who are not eligible to enroll in an HSA include:
- Clients contributing to a flexible spending account (FSA)
- Individuals enrolled in Medicare Parts A or B
- Anyone who is covered by Medicaid
- Marketplace clients with a silver, gold, or platinum plan
Why HSAs Are Valuable for Agents and Clients
HSAs are a great way for independent health insurance agents to add value to their clients’ health coverage. Even clients who use health services often can benefit from healthcare cost saving from an HSA.
HSA-Powered Savings: Pairing with an HDHP to Lower Monthly Premiums
Since the HDHPs that qualify for HSAs have much lower monthly premiums, by opting in to one of these plans, clients are greatly reducing the amount of money they’re spending on premium costs.
Note that HDHPs are ideal for healthy clients who can afford out-of-pocket costs if they need medical services. Those with chronic health conditions, are pregnant or planning to become pregnant, or those without emergency savings can face detrimental and expensive payments after a medical emergency.
Even though HDHPs have lower premiums, they are not the right choice for everyone. Ask your clients the right questions and fact-find to identify the best plan for them and their situation.
HSAs Drive Long-Term Value
Designating funds to an HSA can be a strategic way for clients to save money for their later years. We encourage you to educate clients of all ages about how to hold their pre-tax dollars in their HSA accounts.
Before they turn 65, funds can be used to pay for medical expenses to give more freedom to contribute to a 401(k) or other retirement account. After turning 65, HSA funds can be used for any purpose, similar to a traditional IRA account. Clients would still be able to pay for medical expenses tax free at this point.
Additionally, many HSAs allow individuals to invest their funds. Even small contributions can grow over years due to compounding! Better yet, unlike flexible spending accounts (FSAs), HSA funds roll over from year to year. There’s no “use it or lose it” mentality with an HSA!
Having clients with HSAs provides you with a great opportunity to connect with local tax professionals to form affinity partnerships. Local accountants like these can assist your clients in understanding the full retirement saving tax advantages of HSAs.
Looking for more tips and tricks about forming affinity partnerships? Download our free agent guide!
HSAs Support Tax-Advantaged Healthcare Spending
HSAs are “triple tax advantaged” meaning there are three different kinds of tax savings associated with these accounts.
- Contributions are made pre-tax
- Funds can compound over time tax-free
- When used for qualified medical expenses, withdrawing funds is tax free
By contributing to an HSA, clients are reducing their taxable income while saving on out-of-pocket healthcare costs. This could have a dual benefit for those under 65 by lowering their Modified Adjusted Gross Income (MAGI) and increasing their subsidy eligibility.
Funds sitting in an HSA can also be invested in stocks or mutual funds and grow tax-free over time. This also means that any interest, dividends, or capital gains grow tax free. Clients will never pay taxes on HSA earnings as long as funds are used for qualified medical expenses.
Clients will never pay taxes on HSA earnings as long as funds are used for qualified medical expenses.
HSAs become even more flexible for your clients as they reach Medicare age. After 65, clients can withdraw funds for non-medical expenses without penalty and will only pay income tax on the amount withdrawn, similar to a traditional IRA.
Position yourself as a supportive agent for clients of all stages looking to save for the future.
How Clients Can Open an HSA
HSAs are not typically administered by the health plan, but some plans may partner with a specific financial institution. Here’s how your clients can get started with their own accounts.
Find a Financial Institution
Suggest these steps to your clients looking to open an HSA.
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Search for “Health Savings Account providers” online
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Decide if their current bank offers an HSA option that suits their needs
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Check if their health insurance provider partners with a financial institution that offers HSAs
Identify the Right HSA
Every client that could benefit from an HSA would not necessarily benefit from every HSA.
- Some HSAs have fees: opening and closing the account, monthly maintenance
- Explore alternative banking options, services, and features
- Identify if the HSA offers a debit card or online banking
- Ensure the contribution method works for your client - some HSAs may vary
Partnering with a tax professional or financial advisor could be a great opportunity to form affinity partnerships in your area and offer a higher level of service to your clients. Note that while your clients will need to act on their own to open their HSA, they’ll feel empowered with a knowledgeable agent on their side!
How to Market HSAs as a Benefit
We suggest differentiating your HSA marketing strategy using the audiences you’re looking to connect with. Your ACA clients will have different interests and needs than your clients eligible for Medicare. Here are a few points for each of your audiences.
HSAs and the ACA Market
For marketplace beneficiaries open to taking on the higher out-of-pocket liability of an HDHP, you’ll want to lead by emphasizing premium relief. Suggest an HSA to lower monthly premiums and redirect those savings to an HSA.
These accounts are a valuable tax reduction tool or method for lowering their MAGI, which could make them eligible for subsidies.
HSAs and Those Aging into Medicare
For those approaching 65 but not there yet, an HSA could be a last opportunity to save for retirement or medical expenses after 65. Once clients enroll in Medicare Parts A or B, they are no longer eligible to contribute to an HSA, however funds can be used to cover expenses that Medicare won’t cover later, such as dental, vision, or out-of-pocket costs.
HSAs and Medicare
To connect with clients enrolled in Medicare, educate them on using existing HSA funds. Many don’t realize they can use their HSAs after 65.
As their trusted agent, share the tax benefits of covering Medicare premiums or other medical expenses with their HSA funds. Additionally, make sure that they’re aware that non-medical withdrawals are still allowed, but are taxed as income without penalty.
Their HSA becomes a flexible retirement fund at this point!
Your clients are looking to you to help them save for their futures. An HSA can be a valuable addition for many groups of clients. With the most recent changes in the One Big Beautiful Bill, even more clients are eligible to take advantage of these opportunities.
Register with Ritter for free to offer support to your clients with a strong Sales team in your corner to support you. You’ll also gain access to online contracting through Contract Now* and IntegrityCONNECT for client management.
*Newly registered agents must speak with our Sales team to unlock Contract Now.
Not affiliated with or endorsed by Medicare or any government agency.
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