Health Savings Accounts (HSAs) are seeing a surge in popularity, offering significant tax benefits and investment opportunities in high-deductible health insurance plans, according to reports from Devenir, KFF, and Vanguard on Friday. Despite being frequently mistaken for Flexible Spending Accounts (FSAs), HSAs provide distinct advantages such as pretax contributions and fund rollovers.
Their utilization remains low due to a lack of understanding or affordability issues, as noted by the Employee Benefit Research Institute. Sara Taylor from Willis Towers Watson (NASDAQ:WTW), a company with a market cap of 22.05B USD and a P/E ratio of 21.09, according to InvestingPro, shed light on the matter. It's noteworthy that WTW's management has been aggressively buying back shares, as per InvestingPro Tips, which may reflect their confidence in the company's future performance.
Individuals aged 55 or older can contribute an additional $1,000 above the Internal Revenue Service's (IRS) annual HSA limits of $3,850 for a single person and $7,750 for families in 2023. This is particularly appealing considering WTW's revenue growth has been accelerating and it has raised its dividend for six consecutive years, another insight from InvestingPro Tips.
HSAs cover various medical expenses listed in IRS Publication 502 and can be used even after enrolling in Medicare, the federal health plan for older Americans. It's important to note that supplemental Medigap policies are not covered under HSAs.
In an effort to further enhance the utility of HSAs, the proposed H.S.A. Modernization Act aims to significantly increase HSA contributions. Maria Bruno from Vanguard underscored the flexibility of HSAs, stating that a hypothetical individual could save around $1,390 in taxes by contributing to an HSA.
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