If you have a Health Savings Account, or HSA, and aren’t using it to pay for medical epenxes, you are missing out on tax benefits.

As we explain in our Health Savings Account Guide, HSAs have a triple-tax advantage:

• Put Money in Pre-Tax – Contributions put into an HSA are not taxed. Meaning, your adjusted gross income on your taxes will decrease by the amount you deposit.

• Interest and Investment Gains are Not Taxed – Once your cash balance hits a certain threshold (i.e. $1,000, $2,000, etc.) you can shift any money above the threshold into an investment account. The investment gains are not taxed.

• Withdraw Money Tax-Free – When you withdraw money to cover a qualified medical expense you are not taxed on the withdrawal. In general a qualified medical expense is defined as an expense that pays for healthcare services, medications, or equipment. Clear-cut examples include a prescription you get at a pharmacy or a bill from a doctor visit.

At a minimum, it makes sense to deposit money into your HSA and reimburse yourself for qualified expenses so that you are paying with before-tax dollars.

So how much can you contribute to an HSA? For 2023 the IRS has set contribution limits for HSAs to $3,850 for an individual or $7,750 for a family. For those over the age of 55 there is an opportunity to contribute an additional $1,000.

Besides contributing to your HSA and reimbursing yourself for qualified medical expenses, there are a couple of other ways to optimize your HSA. You can read a more detailed explanation in our post 2 Hacks to Maximize your HSA Health Savings Account, but at a high level they are:

• Pay with a credit card, not with your HSA debit card – When you pay with your HSA debit card, you don’t receive any rewards like cash back or points. Use a rewards credit card that either provides you with travel rewards or cash back. You can view all the latest credit card sign-up offers here.

• Track your qualified medical expenses, then reimburse them years down the road from investment gains – What most people don’t realize is there is no time limit for reimbursing your expenses from your HSA. Meaning, if you incur a qualified expense in 2023, for example, you can reimburse it at any point in the future, even years down the road (you must have had an HSA when the expense was incurred for it to be eligible for reimbursement).

The benefit of tracking your medical expenses and reimbursing later on is that you can keep more cash in your HSA, which allows you to invest more money. Remember, the investment gains are not taxed, so you can keep building your investments tax-free.

Think of the alternative. If you reimburse yourself for a medical expense immediately from your HSA, that cash exits your tax-sheltered HSA account, and you miss out on all the tax-free investment gains.

HSA Medical Expense Tracking Spreadsheet

 
The best way to track your medical expenses is in a spreadsheet. That way you have a record of what expenses you’ve paid for but haven’t reimbursed from your HSA. Then at any point in the future you can reimburse yourself for some or all of the expenses in your spreadsheet.

Here’s my approach:

• Create a folder to store your receipts.
   
  Include the date and some sort of unique descriptor (e.g. 2022_12_15 Chiropractic Block of Care Robert).

• Add the expense to a tracking spreadsheet.
   
  In the first column, include the name of the receipt (e.g. 2022_12_15 Chiropractic Block of Care Robert). That way you can easily locate the receipt that aligns to the row. Remember, if you use the strategy of reimbursing yourself later on, you may need to go back years later – make it easy on yourself. Include other details in the spreadsheet such as what payment was used, the servicer/company you paid, cost, etc.

Instead of starting from scratch you can grab a copy of our free HSA medical expense tracking spreadsheet.

I included a couple examples in it to give you an idea of the type of details you may want to record. You can grab this spreadsheet for free by entering your email in the below form:

There are many ways to maximize your Health Savings Account, or HSA.

We list many of these in our Health Savings Account (HSA) Guide. This guide also provides a nice overview for those who are a newer to Health Savings Accounts.

They include things like:

• Shifting dollars from the savings portion of your HSA to the investment portion of your HSA, which allows your balance to grow tax-free (as long as you withdraw for elgibile medical expenses)

• Maxing out your HSA contributions each year

• Making sure you aren’t missing out on elibible expenses

While some of the more basic hacks to maximize your HSA are a good starting point, there are a couple of hacks that most people don’t know about.

And when I say hacks, let me be clear: these are all 100% legal ways to take full advantage of your Health Savings Account.

If you are ready to take your HSA game to the next level, here’s two things you can do:

Hack #1: Pay with a credit card, not with your HSA debit card

 
Similar to how a bank provides you a debit card that allows you to make purchases directly from your bank account, HSA providers also provide a debit card so that you can make purchases directly from your account.

The problem with an HSA debit card is that you miss out on credit card rewards, such as cash back and travel rewards.

There is no requirement to use an HSA debit card to use your HSA. You can use any form of payment, even cash, to make purchases. Then all you need to do is reimburse yourself.

It may feel like an extra step, but over time medical spend can really add up. Additionally, when you pay with a credit card it gets you in the practice of uploading a receipt when you go in and reimburse yourself. When you use an HSA debit card, it can be easy to not keep a copy of your receipt.

One other thing to think about is the fact that medical expenses can sometimes be quite material. We had our first kid in 2023 and we knew that the bill would be in the thousands, since we have a high deductible health plan.

So what we did was we signed up for a new credit card that required a certain amount of spend to receive their sign-up bonus (e.g. $2,000 within the first four months to get 50,000 points, which translated to a $500 statement credit). We easily put the required amount on the card when we paid the hospital bill.

To recap: pay with a credit card for the rewards, save the receipt, and go into your HSA servicer’s portal to reimburse yourself.

Hack #2: Track your qualified medical expenses, then reimburse them years down the road from investment gains

 
This second hack builds off of the first one.

Something that most people don’t realize with a Health Savings Account is that there is not a time limit for when you can reimburse yourself for a qualified medical expense.

Practically speaking, you could have a hospital bill of $1,500 in 2023 that you paid for with a credit card. As long as you save the receipt and keep a record of the expense, you can reimburse yourself 5, 10, 15, or even 40 years later.

One thing to keep in mind is that the eligible expense does need to occur when you have a high deductible health plan and an HSA. So if you had a bill in 2021 but didn’t have an HSA until 2023, you can’t go back and reimburse that 2021 bill.

This is a huge benefit for a few different reasons:

• You keep more cash in your HSA
   
  With an HSA you can put money in pre-tax and take money out pre-tax (as long as it’s for an eligible medical expense). While that cash is in your HSA, you can also invest it.
   
  What this means specifically for our example of a $1,500 hospital bill in 2023 is that you don’t have to take out $1,500 in 2023. You can let that $1,500 you would have taken out and let it grow via mutual fund investments in your HSA until 2023, in which case you can withdraw it. So instead of paying $1,500 with little investment gains in 2023, you can potentially take out $1,500 ten years later totally from investment gains.

• You Build up a Secondary Cash Emergency Fund
   
  If you take this approach you can, at any time, reimburse yourself for your expenses. You don’t have to wait until years down the road.
   
  Let’s say over the course of a couple years you have $2,000 of eligible medical expenses. That means any day you could log into your HSA servicer’s portal and reimburse yourself for $2,000 worth of expenses.
   
  I often talk about an HSA being a medical emergency fund, which it is, but if you are able to hold off reimbursing yourself you can build up a cash reserve that can be tapped, tax-free, at any given time in the future. The longer you hold off on reimbursing yourself, the larger this fund will be.

• Future Medical Expenses May Be Massive
   
  In general, I think the annual contribution limits for Health Savings ACcounts are relatively low.
   
  For example, in 2023 the limits are $3,850 for an individual or $7,750 for a family. To be clear, I am not saying this is a small amount of money and there is certainly an argument to be made that there is an increasing divide of those who have well-funded HSAs and those who do not. But what I am saying is that health care expenses are becoming more and more material, especially for seniors. If you let your HSA grow while you are in your 20s, 30s, and 40s, you will have more tax-free assets to use later in life for expensive medical care such as long-term care in a facility or in-home care.
   
  With this in mind, the more money you can keep within your HSA the more you can invest within your HSA and the larger your nest egg will be for future expenses.
   
  And remember: in a pinch, as long as you tracked your expenses you can always get reimbursed from your HSA. Which is why this hack works so well.

Tracking Your Medical Expenses

 
The best way to track your medical expenses is in a spreadsheet. What I do is this:

• Create a folder to store your receipts. Include the date and some sort of unique descriptor (e.g. 2022_12_15 Chiropractic Block of Care Robert).

• Add the expense to a tracking spreadsheet. In the first column, include the name of the receipt (e.g. 2022_12_15 Chiropractic Block of Care Robert). That way you can easily locate the receipt that aligns to the row. Remember, if you use the strategy of reimbursing yourself later on, you may need to go back years later – make it easy on yourself. Include other details in the spreadsheet such as what payment was used, the servicer/company you paid, cost, etc.

Instead of starting from scratch you can grab a copy of our free medical expense tracking spreadsheet. I included a couple examples in it to give you an idea of the type of details you may want to record. You can grab this spreadsheet for free by entering your email in the below form:

 
To recap:

Get yourself a solid rewards credit card instead of using the HSA servicer’s debit card.
 
Start tracking your medical expenses and saving your receipts.
 

Or, perhaps you may have had an HSA for years but haven’t used it.

It sounds weird, but I love writing and talking about Health Savings Accounts. I don’t think enough people know about the benefits of Health Savings Accounts.

An HSA comes with a number of benefits. It creates a (much-needed) medical emergency fund, has a “triple tax advantage,” and is a retirement account on steroids.

We’ll go through all the details of an HSA in this Health Savings Account guide so you have all the info you need to take full advantage of the benefits. Let’s start by talking about High Deductible Health Plans, or HDHPs. Why start there? Because you need to have an HDHP to contribute to an HSA.

High Deductible Health Plans – What Are They?

 
HDHPs are health insurance plans that have a relatively high deductible before your insurance kicks in. For example, you may need to spend $3,000 of your own money towards medical costs before your health insurance pays anything. Even though your insurance doesn’t pay anything until you hit your deductible, you would still reap the benefits of having health insurance because you would get their negotiated pricing, which knocks off some of the cost of provider visits, pharmacy drugs, and other costs.

The IRS sets the parameters for what is and isn’t an HDHP. For 2023, the IRS defines an HDHP as any plan with a deductible of at least $1,500 for an individual or $3,000 for a family. As long as your coverage hits those minimums you have an HDHP and are eligible to contribute to an HSA.

$1,500 is actually a pretty low deductible. Many plans will have a deductible of $3,000+ for an individual and $6,000+ for a family. Typically the higher the deductible the lower the monthly premium. The good news is that HDHPs total yearly out-of-pocket expenses are capped by IRS guidelines. These out-of-pocket costs can’t be more than $7,500 for an individual or $15,000 for a family, though this limit doesn’t apply to out-of-network services which could have a cap as high as $10,000+ for an individual or $20,000+ for a family.

You may be wondering how the out-of-pocket max comes into play, since insurance kicks in once you hit your deductible. Well, just because you hit your deductible doesn’t mean that you are done owing money; it just means your insurance will cover most of the costs. You may see something like an 80/20 cost share once you hit your deductible, meaning for a $1,000 bill you would owe $200 and your insurance would cover $800. The out-of-pocket max is the absolute maximum you will pay. If you need an expensive surgery, a hospital stay spanning a few days, or some other expensive event you will likely hit not only your deductible but also your out-of-pocket max.

HDHPs are becoming more popular

Many employees today have no choice but to sign up for an HDHP because it’s the only option that their employer offers. According to a data brief from the Center for Disease Control and Prevention, the percentage of adults aged 18–64 with employment-based coverage that had HDHPs increased from 14.8% in 2007 to 43.4% in 2017. Keep in mind this doesn’t include the millions who get their insurance through the exchanges, which virtually only offer HDHPs.

HDHPs are both good and bad. They are good because they allow for lower monthly premiums. They also can, in some situations, give an incentive for the consumer to shop around. For example, when I got a CT scan a few years ago I would have paid $1,000 if I went to the place my doctor referred me to. Instead I shopped around and paid $300.

The elephant in the room is the large amount of costs it puts on a consumer before their insurance kicks in. I wasn’t surprised in the least when Presidential candidate Kamala Harris in a debate about health care, painted the picture of the mother with a sick infant who was parked outside the emergency room, hoping she wouldn’t have to go in because she knew she could afford a bill of $1,000+.

HDHPs can serve as a “medical emergency fund”

That’s where a Health Savings Account comes into play. An emergency fund is great, but we’ve gotten to a point where even if you have insurance you are exposed to a potential for a big surprise medical bill. This is why the cost of health care is my biggest concern for millennials. Too many don’t have an emergency fund, let alone a separate medical emergency fund. I fully recognize that some are in a position where cash flow is tight and it’s extremely difficult to save money in an emergency fund.

Now that we have a solid background on HDHPs and why it is beneficial to sock away money in an HSA, let’s talk about the specifics of HSAs.

Health Savings Accounts – How They Work and How to Maximize Them

 
For 2023 the IRS has set contribution limits for HSAs to $3,850 for an individual or $7,750 for a family. For those over the age of 55 there is an opportunity to contribute an additional $1,000.

Most HDHPs will already have an HSA provider set up that you can leverage with your health insurance. If you don’t have one, though, a few of the major providers are Fidelity, Lively, The HSA Authority, and Optum. When picking one you will want to understand any fees they charge as well as the minimum balance required to invest (more on that in a moment).

One important distinction to keep in mind is that an HSA is not a Flexible Spending Account (FSA). FSAs have a silly “use it or lose it” policy where you lose any money that is left in the account at year-end. HSAs stay with you forever. You can switch employers, move to another state, change medical coverage, get married or divorced, or any other number of life changes and your HSA stays with you.

Now let’s get to the tax advantages that come with HSAs, specifically the “triple tax advantage”:

• Put Money in Pre-Tax – Contributions put into an HSA are not taxed. Meaning, your adjusted gross income on your taxes will decrease by the amount you deposit.

• Interest and Investment Gains are Not Taxed – Once your cash balance hits a certain threshold (i.e. $1,000, $2,000, etc.) you can shift any money above the threshold into an investment account. The investment gains are not taxed.

• Withdraw Money Tax-Free – When you withdraw money to cover a qualified medical expense you are not taxed on the withdrawal. You can consult a tax expert on exactly what is and isn’t a qualified medical expense, but in general an IRS-qualified medical expense is defined as an expense that pays for healthcare services, medications, or equipment. Clear-cut examples include a prescription you get at a pharmacy or a bill from a doctor visit.

One reason I call HSAs a “retirement fund on steroids” (no pun intended) is because after the age of 65 you can withdraw money from your HSA for non-medical expenses without incurring a 20% penalty. You will still have to pay taxes on the withdrawal, as this withdrawal would be treated similar to a withdrawal from an IRA. But you also have the option of withdrawing funds for qualified medical expenses and pay no taxes at all, regardless of your age. Meaning, an HSA acts similar to a standard IRA retirement account with the (huge) added benefit of potentially taking out the funds tax-free if you have medical expenses. With the way health care costs are going and with people living longer, there’s a very good chance you will have many qualified medical expenses when you are 65+.

A final benefit I want to point out is that you can use it for anyone in your household. What I like about this is that if you are caring for and covering the medical bills of a parent, sibling, or child, you can leverage your HSA to pay the bills tax-free. This could be invaluable if you have a sibling or child with a disability who you anticipate caring for long-term.

Health Savings Accounts – Strategies to Maximize

 
Whether or not you contribute to an HSA – and how much you contribute – depends entirely on your individual financial situation. You can talk this over with a financial advisor or money coach. With that being said, here are a few strategies to maximize HSAs:

• Deposit as much as possible, as early as possible. While I don’t have research or a robust data set, what I’ve seen is that people tend to only contribute to an HSA if they have medical issues. If someone is relatively healthy they don’t contribute. I will admit my wife and I didn’t max out our HSA until after we had a pair of surgeries and realized how important it was to have money set aside ahead of time.

• Shift your money out of cash and into investments as soon as possible. The HSA I have has a threshold of $2,000. I log in every two weeks and if my balance is above $2,000 I shift every dollar I can to investments. Now that I have some traction my ultimate goal is to get my HSA to $100k.

• Never use the debit card the HSA provider sends you. Instead, use a rewards credit card and then simply reimburse yourself through your HSA. HSA providers are making money each time you swipe their card, but they aren’t sharing the wealth with you. There is no requirement to use their debit card, so you should be using a solid rewards credit card instead.

Not taking full advantage of an HSA – or Health Savings Account – can be a costly mistake for those who are in the financial position to contribute to one.

There is a general lack of information about the advantages that HSAs offer. I often hear financial “gurus” give people advice such as “invest in an IRA” or “contribute more to your 401(k).”

While this in and of itself is not bad advice, I think it’s tragic how few are being advised to max out their HSA contributions. It’s a practical thing people can potentially drastically improve their finances over time.

Understanding what an HSA Is

 
Many people do not even know what an HSA is or how it works. Health insurance plans that have an HSA component allow individuals to contribute money pre-tax into their HSA. In 2023 the HSA contribution limit is $3,850 for an individual and $7,750 for a family.

Once you have deposited money into your HSA account you can use it tax-free for qualified medical expenses. Qualified medical expenses are listed in IRS publication 502, at a high level they include practically any doctor visit, medical bill, or prescription. Recently eligible expenses have been expanded further to include things such as a carpal tunnel glove and sudafed. Many vision and dental expenses fall under this category as well. As you can see, HSAs have huge tax advantages when used for medical costs.

Besides lowering your taxable income, depositing money into an HSA has the dual advantage of creating a medical emergency fund. As long as you are regularly contributing to your fund, you will never have to worry about whether you have the money to cover health expenses.

Why an HSA is the Absolute Best Retirement Account

 
Now that we’ve established the benefits of contributing to an HSA – that you can pay for eligible medical expenses tax free – I want to focus on why I think it’s the best retirement account out there.

First it’s important to realize that you will never lose the money in your HSA for not spending it within a certain time frame. This is an important difference between HSAs and FSAs (Flexible Spending Accounts). With an FSA there is a “use it or lose it” aspect to it, where you lose whatever you don’t spend within a calendar year.

Not the case with HSAs. Once you contribute dollars towards your HSA, they are available for you until you use them, even if you use them decades later.

With that in mind, it’s important to think of an HSA as a retirement account.

• Invest your Funds
   
  Once an HSA exceeds $2,000 (or whatever the HSA administrator allows – in some cases the threshold is as low as $0) the owner of the HSA can invest whatever is above the $2,000 floor. That means if your balance is at $5,000 you can invest $3,000 in mutual funds. I just did this recently and told a number of people about it. None of them knew you can invest your HSA funds.
   
  Even better, the gains on investments are not taxed if withdrawn and used for a qualified medical expense. This is why an HSA is often referred to as having a triple tax advantage.

• Like a traditional IRA, but Better
   
  An HSA is like a traditional IRA in almost every way. The biggest difference is that people are able to withdraw the money tax-free for qualified medical expenses.
   
  When you think about it, would you rather have money in a retirement account that does not allow you to withdraw for any reason without a tax penalty or would you rather have your money in an identical account that allows you to withdraw money tax-free for medical purposes?

• Employer Match
   
  Many employers will encourage employees to contribute to their HSA account by offering a matching contribution amount. Typically this will be in the $500 range for individuals and $1,000 for families.

• You can Still Contribute to other Retirement Accounts
   
  Another perk of an HSA is that it gives you another opportunity to take advantage of the tax benefits that other retirement accounts take advantage of. IRAs and 401(k)s have contribution limits, but in no way does HSA contributions count against those limits. Instead, an HSA is just one more way that people can save for retirement.

 
The many advantages that come with contributing to an HSA, including advantages that even traditional retirement accounts lack, it’s clear to see why an HSA is the absolute best retirement account.
 

For those that can access and afford health care in the United States, many would argue that the US health care system is the best in the world. But what about those who can’t access care? Or can’t afford it.

The Affordable Care Act, more commonly referred to as Obamacare, greatly expanded access to the health care system. Today in the United States you are essentially guaranteed health insurance that does not – and cannot – discriminate based on pre-existing conditions.

Obamacare was a huge step for the country. For years health care was a personal issue for millions who had claims denied due to pre-existing conditions, or couldn’t access health care at all.

I have been priveleged in my life to always have insurance through my parents or an employer. If it wasn’t for modern medicine or health insurance, there is a good chance that I wouldn’t be alive today. I spent a week in the ICU years ago due to asthma. My memory of that night in the ER was one of slipping in and out of consciousness and having ten doctors surrounding my bed, treating what certainly was my airways closing in tightly, restricting my ability to breathe.

Later in life I had two sinus surgeries and received five years of allergy immunotherapy. If health insurance companies were able to discriminate based on pre-existing conditions I would have had to pay for all of it out of pocket, or put up with the ailments daily, with little relief.

Despite access, expanding, affordability is still a major issue with the US health care system. One of the great ironies of the Affordable Care Act is the fact that “affordable” is in the title.

One reason health insurers historically have been able to keep premiums and deductibles low is the fact that they could discriminate based on pre-existing conditions. Organ transplants and cancer care, for example, can cost $100k+ easily. Being able to deny those claims based on pre-existing conditions saves money. Being pregnant when you start your insurance plan was a pre-existing condition, making it possible for health insurers to deny claims related to the pregnancy.

If we are honest with ourselves we all know that discriminating based on pre-existing conditions shouldn’t be possible. Which brings me to my biggest complaint about health sharing ministries: they discriminate based on pre-existing conditions.

Health Sharing Ministries are not Health Insurance…or are they?

 
If you aren’t familiar with health sharing ministries, they essentially are a way for people to voluntarily band together and share medical costs among themselves. Legally health sharing ministries are not health insurance because they do not take risk. Health insurance involves an individual having a contract with a health insurer who is legally obligated to pay medical expenses based on the terms of the contract. Health sharing ministries are entirely voluntary and the health sharing ministry itself does not pay claims; they simply facilitate the spreading of the voluntary monthly contributions.

Because health sharing ministries do not take risk they are not regulated like health insurance companies. They can – and do – discriminate based on pre-existing conditions. Besides being required to cover pre-existing conditions, health insurers must also provide a certain minimum coverage. Health sharing ministries do not; after all, legally they are not health insurance.

The voluntary nature of health sharing ministries is important, as that aspect of it legally (key word: legally) puts it in a different category than health insurance. But there is no denying that health sharing ministries are being used in place of health insurance.

The reason why is simple: it’s cheaper!

Many (most?) who take advantage of health sharing ministries are not eligible for Medicaid or Medicare, and do not have health insurance through an employer. The remaining option is getting coverage on the individual insurance exchange that was created through ObamaCare. The problem is that this insurance can be expensive, with high monthly premiums and high deductibles, especially for middle class to upper middle class families whose income disqualifies them from subsidies.

It’s worthwhile to note that the pricing of insurance through the exchanges is not because companies are making billions of dollars on the exchanges. In fact, UnitedHealth Group, the largest health insurer in the United States based on membership, exited most exchanges after losing over $700 million on their exchange business in 2015. That means they needed to price the plans even higher just to break even.

Let’s put ourselves in the shoes of someone who faces a high cost to have health insurance through the exchange. Perhaps they utilize health care minimally and haven’t had an emergency or high cost episode (i.e. surgery, trip to ER, overnight hospital stay) in years. They eventually may look at their premium and deductible and think “this just isn’t worth it.” But let’s also say that individual or family doesn’t want to completely forgo the protections of health care coverage.

Cue health sharing ministries.

If you read the fine print of a health sharing ministry, they are able to keep their costs low by, in essence, shutting out those with pre-existing conditions. There are also a ton of things they don’t cover, such as durable medical equipment (nebulizers, hearing aids, oxygen tanks, ventilators), mental health care, and emergency room visits that were later determined to not be an emergency (from how I interpret section IV.B.9 you have to know prior to going to the ER that you are actually having an emergency).

See page 15 of this document from Liberty HealthShare (last accessed June 15th, 2019), which lays out the limitations on pre-existing conditions:

Pre-Existing Conditions. A condition for which signs, symptoms or treatment were present prior to application, or can be reasonably expected to require medical intervention in the future, need to be declared upon application for Liberty HealthShareSM membership, and updated with any new symptoms/signs or diagnoses that become apparent after the application submission. Failure to declare a medical condition upon application, or failure to update Liberty HealthShareSM after application, may preclude sharing in that condition any time in the future. Failure to fully disclose known or suspected pre-existing condition information at the time of application and before Enrollment Date is a violation of our shared trust between members and may subject the member to termination of membership. Chronic or recurrent conditions that have evidenced signs/symptoms and/or received treatment and/or medication within the past 36 months are not eligible for sharing during the first year of membership. In the absence of a Permanent Waiver, after the first full year of continuous membership, up to $50,000 of total medical expenses incurred for a pre-existing condition may be shared in total during the second and third years of membership. Upon the inception of the 37th month of continuous membership and thereafter, the condition may no longer be subject to the pre-existing condition sharing limitations. Appeals may be considered afor earlier sharing in surgical interventions when it is in the mutual best interest of both the members and the membership to do so.

In their defense, they do set a limit of $50k after one year of membership and after three years, the pre-existing condition is no longer subject to the $50k limit. But many who have pre-existing simply don’t have the luxury of being exposed to this type of risk. After all, even if you do last the three full years to have the pre-existing condition tag removed, there is no guarantee your bills will be covered by the health sharing ministry.

When you factor in all of the fine print of health sharing ministries, some of which would be illegal for health insurers to include in their plans, it’s obvious why health sharing ministries are affordable alternatives to traditional health insurance. So while it’s legally not health insurance, it’s absolutely being used by hundreds of thousands as a direct alternative to health insurance. Which leads me to my next problem with health sharing ministries: they hurt those who need care the most.

Health Sharing Ministries Hurt Those Who Need Care the Most

 
Affordable health care for all can only be achieved in a couple of ways:

• A large population with a mix of those with chronic healthcare conditions and those who are healthy

• Government subsidies that cover a portion of the cost of health care

The reason why health insurance through an employer is typically somewhat affordable is because the employer is paying a big portion of the costs. When you take the employer out of the equation, all the costs land on the individual. Combine that with the fact that Obamacare exchanges need time to stabilize from a cost perspective and it’s a recipe for what appears, on the surface, to be expensive health insurance. In reality a big contributing factor is the employer contribution not being present, which doesn’t show up in a paycheck.

In the same way the government could subsidize health insurance to make it affordable, and they do. ACA plans are subsidized based on income. Medicare and Medicaid are subsidized as well.

But what the individual exchanges need is more membership: healthy membership. The more members there are, the easier it is to manage the costs and contract for better pricing for the members. What health sharing ministries do, though, is draw membership away from the individual exchanges. But those who had cancer, or have asthma, or have any other number of pre-existing conditions simply can’t risk opting into a health sharing ministry because they risk financial ruin if a high cost episode occurs.

As a Christian I have a very difficult time viewing a health sharing ministry as virtuous. At the end of the day they operate very similar to health insurance, without having to abide by legal regulations that protect those who need health coverage the most. After all, for years people railed against health insurance companies (including many nonprofit health insurers) for denying claims based on pre-existing conditions. Yet health sharing “ministries” have essentially replicated the model of pre-ACA health insurers.

 
Any critique of health sharing ministries typically makes those who benefit from them defensive. They point out how unaffordable the Obamacare plans are, how much money they save through their health sharing ministry, and how they are healthy and don’t need that much coverage because they are healthy. It’s always interesting to hear these responses. My response is always the same: who are you trying to convince? When you look at the health insurance industry and health sharing ministries, no one (or almost no one) would argue with any of these points.

The issue is that many defenders of health sharing ministries will say that health sharing minstries are not insurance. But there is no denying they are using it as a low-cost health insurance plan. Legally it’s not health insurance, but for the individual participating in a health sharing ministry it looks and feels like health insurance.

T will close by saying there is no reason to take a critique of a health sharing ministry personally. Humans are going to act in their best interest, and for some health sharing ministries offer them affordable health “insurance” in case they face a high cost episode.

Similar to someone taking advantage of tax loopholes to save money, the critique of the tax loophole shouldn’t be on the individual but on the policy itself. Is it time for policy makers to take a second look at health sharing ministries?

Obsessed may be the wrong word because it’s something I have very little control over.

But I still think it would be pretty cool to have $100k in an HSA.

For 2019 the maximum HSA contribution for an individual is $3,500 and for a family is $7,000. If you are 55+ at any point in 2019 you can contribute an extra $1,000.

With how expensive health care is today, it wouldn’t be unheard of for an individual to spend $3,500 in a year, or a family to spend $7,000 in a year, on medical expenses.

But to get to the coveted $100k in your HSA you would need to deposit more than you spend, and it takes just one illness with crazy high prescription drug costs, or a surgery, or an overnight at a hospital, to spend $3.5k or $7k on medical expenses in a given year. And if you spend everything you put into an HSA, you won’t be able to continue to build the balance.

But let me take a step back and explain what an HSA is and why I love maxing it out each year.

How an HSA Works

 
If you have a high deductible health plan (HDHP), you can take advantage of an HSA. HDHPs are becoming common for a variety of reasons. First, they come with lower monthly premiums, which consumers react positively to. Second, health insurers believe that when a consumer is responsible for their medical expenses they are more “price conscious” and potentially even shop around.

This logic holds true in some cases, but certainly not all. If you are facing an emergency situation you likely aren’t going to think twice about going to the ER or not. Unfortunately HDHPs may cause people to not seek necessary care because they are responsible for thousands of dollars of medical expenses before their insurance starts covering a portion.

Regardless of the pros and cons of HDHPs, they are here to stay and will likely only become more common over time.

If you are stuck with an HDHP, you should be taking advantage of an HSA for two big reasons: medical emergency fund and tax benefits.

 
Medical Emergency Fund
 
It’s not uncommon for a HDHP to have a deductible as high as $6,000. The problem is that according to a 2018 report from the Federal Reserve Board, 4 out of 10 Americans do not have cash on hand to cover a $400 emergency without borrowing or selling something.

But some (most?) medical costs are unexpected, and with a HDHP you could be on the hook for thousands of dollars from a single unexpected medical episode.

That’s why it’s important to establish a medical emergency fund. This at least to a certain extent takes money out of the decision whether to pursue care. Thankfully an HSA gives you tax advantages to give you an incentive to build a medical emergency fund.

 
Tax Advantages of an HSA
 
HSAs have what many refer to as a “triple tax advantage.” This is because of the following tax benefits:

• Put Money in Tax Free – As mentioned earlier, you can contribute up to $3,500 as an individual or $7,000 as a family per year into an HSA. If you are 55+ at any point in 2019 you can contribute an extra $1,000. Those contributions are pre-tax dollars, meaning it shields those contributions from being factored into your taxes.

• Grow Money Tax Free – With an HSA you are typically required to keep somewhere around $2,000 as a cash balance. Once you get past that minimum benchmark, though, you can move money into the investment portion of your HSA. Similar to a 401(k) or an IRA, there will be a variety of mutual funds you can invest in. The gains on these investments are tax free, and you can shift the money back into the cash portion of your HSA at any time.

• Take Money out Tax Free – When you withdraw funds from your HSA for qualified medical expenses (think prescriptions, doctor bills, etc.) you are not taxed on the withdrawal. If you withdraw money for non-qualified medical expenses, the amount will be taxed as regular income and incur a 20% penalty.

As you can see, contributions to your HSA (up to the annual limit) are tax-free, investment gains within the account are tax-free, and you can take money out tax-free for eligible medical expenses.

But there is one additional aspect of an HSA that doesn’t get enough mention: No withdrawals from an HSA after age 65 are penalized, though withdrawals for non-qualified medical expenses are taxed as regular income.

It has the same benefits after age 65 as other tax-deferred retirement accounts like a 401(k) or 403(b), as you are able to withdraw funds and have them be taxed as regular income. But it also offers the continued extra benefit of allowing tax-free withdrawals when used for qualified medical expenses.

While many in their 20s and 30s aren’t thinking about their finances when they are in their 60s, 70s, and beyond, it doesn’t take a health industry expert to predict that health care costs will be high in old age. Building up your HSA now could set you up very nicely in your retirement years.

Because of the investment benefits, it oftentimes makes sense to contribute to an HSA even if you are “healthy” and rarely have medical costs. The quicker you can build up a sizable balance in an HSA, the sooner you can get money into investments, and the sooner those investments can build.

Worst case scenario you withdraw funds from

 
The $100k HSA
 
Between the two of us my wife and I had three surgeries over the course of three years, resulting in high medical bills. Thankfully since that time we have had lower medical costs.

While there are some planned big costs on the horizon such as Lasik and pregnancies, as long as the costs remain low and we continue to max out our HSA year-after-year we will be slowly but surely on our way to a $100k HSA.

 
 
What about you? If you have access to an HSA, have you started to sock away money? Why or why not?
 
 

As much as I love building something that is all my own, there is one thing from my old job that I miss dearly. No, it isn’t the paycheck (although that would come in handy now that the severance has run out). It is the employee benefits package.

My former employer offered its employees a veritable treasure trove of perks, amounting to thousands of dollars in compensation above our salaries. It wasn’t until I was transitioning out of the company that I really dove into everything that was available.

Every year American workers leave thousands of dollars on the table in the form of company benefits. According to the U.S. Department of Labor, on average combined benefits are worth 30% of total compensation.

To ensure that you are getting the absolute most value from your labor, here are thirteen benefits you should take advantage of if your employer offers them.

1) Health Insurance

 
Due to the Affordable Care Act, any employer with over 50 full-time employees (30 or more hours per week) is mandated to provide healthcare coverage.

Healthcare is an expensive good and the cost is only rising. Using group buying power, companies are able to negotiate substantial discounts on health insurance plans. They also subsidize the cost of premiums. The Labor Department estimates that health insurance benefits are worth more than $4,000 annually per covered employee.

Even if you are 100% healthy it is a good idea to enroll in your employer’s health insurance. Having coverage can shield you from bearing the full financial burden of unexpected medical expenses due to an accident or sudden illness. It also covers the preventative care that helps you remain healthy.

2) Dental and Vision Insurance

 
Many healthcare insurance plans have coverage that is separate from dental and vision care. Thankfully, many employers offer additional insurance.

Most dental plans cover at least two professional cleanings and exams every year. Research shows that over 90% of systemic diseases have oral manifestations. Through regular checkups you dentist may be the first to see signs of diabetes, heart disease, kidney disease, and more.

In most states a dental exam will cost at least $50. However, with additional care like cleaning, x-rays, and fluoride treatment that cost can leap to over $300. Procedures like fillings and orthodontics can be thousands of dollars.

Many employer plan dental premiums are under $20 per month. That is well worth it when that toothache requires a root canal to fix or years of not wearing your retainer leads to needing braces as an adult.

Vision plans are also relatively inexpensive through employer plans and usually cover at least one eye exam and pair of glasses or set of contact lenses every year. Some employer plans even cover Lasik eye surgery.

3) Healthcare Savings Accounts/Flexible Spending Accounts

 
Insurance is definitely helpful when it comes to paying for healthcare expenses, but it does not cover everything. Out of pocket medical, dental, and vision expenses can easily cost a couple thousand dollars every year.

To help employees prepare for these costs many employers offer access to Healthcare Savings Accounts (HSA) and/or Flexible Spending Accounts (FSA). These savings vehicles allow employees to set aside pre-tax money for medical expenses every year.

While this benefit may not initially appear to be worth more money, it is important to remember that reducing taxable income via pre-tax deductions can equal big savings with the IRS. For 2018 the maximum contribution you can make to an HSA is $3,450 for a single coverage plan and $6,900 for a family plan. The max contribution to an FSA is $2,650.

On top of the tax savings, some employers even match employee contributions to an HSA or FSA. Take advantage of free money by enrolling in your company’s healthcare plan and accompanying savings accounts during the next open enrollment period.

Related:

• Why an HSA is the Absolute Best Retirement Account

4) Paid Vacation and Sick Leave

 
There are some jobs that make it difficult to leave the workplace. However, if your employer offers paid vacation and sick days it is worth it to take advantage of the time. According to Project Time Off, a coalition of organizations dedicated to changing the thinking and behavior of Americans about vacation time, U.S. companies recorded roughly $224 billion in unused vacation time.

No matter how busy your profession is, research shows that time away from is good for employee performance. Taking a break prevents burnout, strengthens team bonds, and improves employee morale.

If you are sure your employer cannot survive without you for a week, consider taking your vacation days in smaller increments of two to three days at a time. It is also unnecessary to leave travel far from home in order to have holiday from work. Simply stay home, unplug from e-mail and phone calls and treat yourself to some much needed rest and relaxation. You are getting paid for it.

5) 401K Match

 
The days of working for thirty years then retiring with a hefty pension are reaching an end. More and more employers have shifted the responsibility of retirement saving onto their workers.

However, many employers give their employees’ retirement accounts a boost with matching contributions. It is very common for a company to match employee contributions at $.50 on the dollar up to 5 or 6% of salary.

Independent financial advisory firm Financial Engines found that one in four employees miss out on matching contributions to the tune of $24 billion dollars American workers leave on the table each year.

Although millennials often find it difficult to find the money to save for retirement now, it is important to start as soon as possible to not only take advantage of tax savings and compounding interest, but also to collect free money. Finding ways to increase current contributions by even 1% today can be instrumental in reaching retirement goals.

Related:

• How to Catch Up on Retirement Savings

6) Employee Stock Purchase Plan (ESPP)

 
Do you work for a publicly traded company? Many offer an employee stock purchase plan which allows employees to buy shares at a discount (usually 10-15% depending on the program). Employees can designate post tax dollars be deducted from their payroll checks to purchase this discounted stock.

For example, as an employee you can designate an amount or percentage from your check every pay period. If your company’s stock is trading at $50 a share the ESPP lets you use the post tax money saved to buy it for $45 (assuming a 10% discount). When that stock value rises to $55 per share you’ve made $10 per share while everyone who had to pay market price only made $5.

This is a great way to start investing because not only do you know the company’s potential to do well, you have an added vested interest and role in its performance.

7) Comp Time

 
For those who work more than 40 hours per week some employers offer their workers comp time. Comp time is sometimes provided to salaried employees who do not qualify for overtime.

To give people some form of reward for working long hours, employers offer comp time in the form of additional payment and/or additional vacation time. If you find yourself at the office early and staying late, this could be a great benefit to use to either boost your paycheck or get the extra time off you need to take that bike tour across South America.

8) Education and Training

 
Another benefit to be on the lookout for is tuition reimbursement and education assistance. Many times you do not need to be a student in a degree program to take advantage of this benefit. Often employers also cover the cost of certifications, trainings, workshops, and more. When I was taking standardized tests for grad school admission my employer paid for both an eight week test prep course and my exam.

Be sure to understand any commitments required to use these benefits. Sometimes employers require employees to remain on staff for a specified period of time after the education is complete and paid for.

9) Professional Services

 
Workers have lives outside of work. People buy homes, enter into contracts, start families and more. Many employers understand this and offer free or discounted professional services like real estate agents, attorneys, childcare, and adoption assistance.

These benefits can be extremely lucrative, saving employees tens of thousands of dollars during already expensive life events. Check your benefits to see if there is a group legal, real estate, or accounting plan. It may require a small monthly premium in order to opt in for services, but many who have used the services attest that it is well worth it.

10) Life Insurance

 
Most millennials do not spend much time thinking about their own mortality. Thankfully, many large employers cover their workforce with life insurance. There is often no premium to pay and some companies do not even require employees to opt-in for coverage.

Death benefits can be as high as two times base salary. While this is often not enough coverage for someone with a family, it can be plenty for a single person without dependents. It is important to note that this coverage is often not portable and is only in effect as long as an employee stays with the company.

Related:

• Ethos Review: Get Life Insurance Online
• Why (and How) I got a Million Dollar Life Insurance Policy at 27

11) Discounted products and services

 
Before you sign up for another cell phone service, gym membership, or buy tickets to the newest feature film or amusement park, check your company benefits first. A lot of companies offer perks like employee discounts for fitness clubs, cell phone providers, movie tickets, amusement parks and more.

Receiving these discounts is often as simple as giving your employer’s name when signing up. Others are available through special websites and company contracted ticketing agencies. This can add up to big savings over time, especially if you use a lot of products and services for communication and entertainment.

12) Free Stuff

 
When thinking about their compensation, many employees forget to include employer freebies. It is common for companies to offer their workforce perks like free parking, meals, gym facilities, banking, and more.

Technology companies are notorious for their free cafeterias serving up breakfast, lunch, dinner, and snacks. One well known company even gives employees free professional massage services every quarter.

13) Transportation

 
Unless you work from home, commuting to work is a necessary cost. Thankfully many employers help subsidize this expense in different ways.

Some partner with companies like Wage Works to allow employees to purchase public transportation passes with pre-tax dollars. Others offer reimbursement for mileage if a certain amount of travel is required for the job.

It is very common for sales jobs to come with either a company car benefit (complete with gas and maintenance coverage) or a transportation allowance. Some of these benefits are taxed as income so be sure to keep track of how much you’re driving and for what purposes (i.e. business or personal).

Dive In

 
This list isn’t exhaustive. Companies are always finding new ways to compensate employees for their hard work outside of standard promotions and salary increases. Stay up to date on what’s available to you by visiting your company’s benefits website at least quarterly.

It would also be a good idea to attend HR’s next briefing on company benefits. Who knows? They may even serve free lunch.

 
Related:

• How to Answer Common Interview Questions [With Free Download]
• 8 Things Your Employer Notices About You at Work
• How to Start a Side Hustle, Even if You’re Busy

 
 
What benefits does your employer offer? Are you using all of them? How have your employee benefits added value to your life?