Health Savings Accounts: A Real Member Benefit
Meaningful discussion has been going on, recently, regarding the value of membership in a credit union. In addition to owner equity, good rates, convenience and confidence, members rate products and services high on the scale when it comes to valuing their credit union membership. With affordable health care at the top of the list of major concerns for most Americans, wouldn't it be a great benefit to your members if you could help ease this burden by making health care more affordable? Well, now you can.
On Dec. 20, 2006, President Bush signed the Health Opportunity Patient Empowerment Act of 2006, which includes new rules that expand the tax benefits for Health Savings Accounts (HSAs). These tax-advantaged health care savings accounts can be offered by credit unions and are a critical step to making health care more affordable.
How do they work?
To set up an HSA, an individual signs up for health insurance with a high deductible of at least $1,100, and an annual out-of-pocket limit not exceeding $5,500, typically saving money up front with the lower premiums charged by high deductible health plans. The deductible for family coverage must be at least $2,200, with an annual out-of-pocket not exceeding $11,000. The IRS will announce future inflation adjusted limits by June 1 of the preceding year.
An account is established at the credit union where the member can deposit up to $2,850 annually to cover individual out-of-pocket health expenses or up to $5,650 for family coverage. The money can be withdrawn to pay for un-reimbursed medical expenses such as deductibles, co-payments, and services not covered by insurance. The contributions are tax-deductible or are excluded from taxable income if made by the employer. In addition, account earnings are tax-deferred and withdrawals are tax-free if used for qualified medical expenses.
But that's not all! Members control when to withdraw HSA funds, allowing unused HSA funds to accumulate tax-deferred from year-to-year, to pay for future medical expenses. The account is fully portable, so employees can take HSA funds with them upon leaving employment.
HSAs are also good for your credit union. As a new type of tax-advantaged account, HSAs represent a potential new source of both member and deposit growth. They can enhance your relationships with, and help you to better serve, your select employee groups and small business members, many of whom use high deductible health plans. They can also help you build primary financial institution status with your members who are looking to your credit union to hold their HSA funds. They may be the tool for providing health coverage for your own employees.
Nearly one-third of high deductible health plan purchasers were previously uninsured, thus you can help those at-risk members achieve greater financial security by offering a no- or low-cost HSA.
We at NCUA recognized the importance of HSAs early on and granted federal credit unions the authority to serve as trustees or custodians of HSAs. Credit unions were early adopters in offering HSAs to their members. The number of credit unions offering HSAs continues to grow, with the number doubling in the last year alone. Share insurance coverage for HSAs is provided on a revocable trust account basis, so members who designate a qualifying beneficiary may be able to receive additional coverage. HSAs are an important tool in the overall effort to help control health care costs through consumer choice. If your credit union does not currently offer HSAs, I hope that the improvements in the law give you a reason to consider their value to your members.
Real savings, real member benefits, and a real, consumer-based solution to the problem of escalating health care costs. HSAs are a solution whose time has come. For more information on HSAs, please visit the U.S. Department of Treasury's Web site at http://www.treas.gov/offices/public-affairs/hsa/.