Ways to manage healthcare spending during the COVID-19 pandemic
Healthcare savings options are extremely important. The current global pandemic has expanded healthcare options, offering more flexibility to people with health savings accounts (HSAs). Insurance plans coupled with HSAs have added options including telehealth and expanded coverage of over-the-counter medicine. HSAs now cover coronavirus testing, all while keeping their well-known tax perks.
Amid the coronavirus pandemic, healthcare spending has dropped as many people have delayed elective surgeries and are avoiding doctor’s offices if possible. According to data‡ from the U.S. Department of Commerce, spending declined at an annualized rate of 18% during the first three months of the year. This accounts for the largest decline in recent years.
Prior to the pandemic, healthcare spending was projected to increase. According to the Centers for Medicare and Medicaid Services, healthcare spending is projected to hit $5.7 trillion by 2026, an annual increase of 5.5 l percent rise from the current $3.5 trillion in healthcare spending. Presently, there is extreme variation in estimates of healthcare costs due to remaining uncertainty. While the future is unknown, we do know that HSAs are a viable option for reducing healthcare costs.
HSAs are a great way for people to save and invest their money for healthcare and future medical costs. They are designed to give people more control over their healthcare. Recently the IRS announced the 2021 health savings account contribution limits. Self-only coverage contribution limits will go up by $50 for a total of $3,600 annually and family coverage contribution limits will increase by $100 for a total of $7,200 annually.
|HSA/HDHP Contribution and Out-of-Pocket Limits (Source: IRS, Revenue Procedure 2020-32)|
|HSA Contribution Limit||Self-only: $3,550
|HSA Catch-up Contributions
(age 55 or older)
|HDHP minimum deductibles||Self-only: $1,400
| Self-only: $1,400
|HDHP maximum out-of-pocket amounts||Self-only: $6,900
Recent changes in healthcare-related rules
In addition, people with HSAs now have more flexibility in how they can use their HSA dollars as a result of recent changes in IRS rules and regulations‡. Since March 11, 2020 there have been five HSA legislative and regulatory changes.
- Covering Coronavirus Test Act : HSA funds can be used to pay for COVID-19 testing and treatment
- Families First Coronavirus Response Act: Expanding HSA regulation surrounding COVID-19 testing without imposing any cost-sharing
- IRS Federal Income Tax Extension: HSA 2019 prior contributions deadline is now July 15, 2020
- CARES Act: Expanding HSA-eligible items to include
- Telehealth (for expenses incurred between March 27, 2020 and December 31, 2021
- Over-the-counterdrugs and menstrual care products. (effective 1/1/20 with no expiration date)
- IRS Notice 2020-35: The IRS announced the deadline for submitting Form 5498-SA for tax year 2019 has been delayed to August 31, 2020.
The current regulations allow health plans with associated HSAs to cover telehealth and other remote care until the end of 2021 at no cost to you, even if you haven’t reached your deductible. Your HSA can also be used for over-the-counter drugs and medicine along with feminine hygiene products. The same holds true for coronavirus testing and treatment. Be sure to check with your health plan for specifics.
If you’re looking to maximize the long-term benefits of your HSA, now may be good time. The IRS extended the tax filing deadline to July 15, giving you time to fund and max out your 2019 HSA contributions. The extension of the filing deadline is a great opportunity to make catch-up contributions.The current regulations allow health plans with associated HSAs to cover telehealth and other remote care until the end of 2021 at no cost to you, even if you haven’t reached your deductible. Your HSA can also be used for over-the-counter drugs and medicine along with feminine hygiene products. The same holds true for coronavirus testing and treatment. Be sure to check with your health plan for specifics.
It’s important to use your income wisely during this challenging time. While your HSA dollars can be saved and invested, you can also use your funds to weather the current climate, as more items can be purchased using your HSA dollars. Generally, your HSA dollars can’t be used to pay monthly health insurance premiums – however, if you are collecting unemployment insurance or are paying for healthcare yourself if you lost your job, you can use your HSA to do so. Consult your tax advisor for additional information.
Learn more about UMB Healthcare Services, which ranks fifth in total accounts and total deposit assets among all HSA providers (Source: 2019 ‡Devenir Year-end HSA Market Statistics & Trends Report‡).
HSAs are a great way to take control of our financial well-being both now and in the future. Recently, UMB Bank earned the honor of being named one of Investor’s Business Daily’s 11 best HSA providers‡ for 2020. Across the U.S., HSA administrators were rated on account features, customer reviews, benefit consultants’ input and Morningstar fund ratings. We are honored to be included in this list of the best HSA account providers, excelling in investment options and investment quality.1
1Investments in securities through an HSA investment account are:
Not FDIC-Insured · May Lose Value · No Bank Guarantee
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