Learn More About HSAs & the Changes to Expect in 2025
As a health and group benefits insurance professional, staying informed about changes to Health Savings Account (HSA) contribution limits is crucial for effectively serving your clients.
The upcoming adjustments for 2025 will impact how individuals and families can utilize these tax-advantaged accounts for medical expenses. Understanding the new limits and the benefits and potential drawbacks of HSAs will enable your team to provide valuable guidance to your clients.
This article and infographic will explore the main changes for 2025, their implications, and how your agency can effectively communicate them to ensure your clients make informed decisions about their healthcare savings strategies in the coming year.
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What Is a Health Savings Account (HSA)?
An HSA is a tax-advantaged savings account used for medical and health expenses, such as emergency, dental, vision, and family health. Both employers and employees can make tax-free contributions to this savings account. Your funds never expire, meaning you can roll over your unused HSA balance year over year. HSAs are only available for participants with a High Deductible Health Plan (HDHP). Learn more about the different types of group health insurance plans, like an HDHP.
Key HSA Changes and Updates for 2025
Every year, the Internal Revenue Service (IRS) publishes new regulations for HSA contribution limits to account for inflation, legislative changes, healthcare cost trends, and more. The updates for 2025 are as follows:
For Individuals
- $4,300 maximum for HSA contributions (a $150 increase from 2024)
- $1,650 deductible minimum for qualifying high deductible health plans (HDHPs) (a $50 increase from 2024)
- $8,300 maximum out-of-pocket HDHP expenses for things like copays, deductibles, and more (a $250 increase from 2024)
For Families
- $8,550 for families (a $250 increase from 2024)
- $3,300 deductible minimum for qualifying HDHPs (a $100 increase from 2024)
- $16,600 maximum out-of-pocket HDHP expenses for things like copays, deductibles, and more (a $500 increase from 2024)
Additionally, it’s good to know that:
- If you are 55 and older, you can submit a catch-up contribution of up to $1,000 annually. This limit is unchanged from 2024.
- Contribution limits are prorated by the number of months you are eligible to contribute to your HSA. To calculate your prorated limit, divide the number of months you were enrolled on the first of the month by 12. Then, multiply that number by your HSA maximum (the number you could contribute if you were eligible for the whole year). Say, for example, you are an individual who is enrolled for only nine months out of the year. Divide 9 by 12, which is 0.75. Then, multiply 0.75 by $4,300 (your maximum contribution for the entire year), which equates to $3,225. That is your new maximum contribution limit.
How Do the 2025 HSA Limit Changes Affect Consumers?
With increased HSA contribution limits, consumers can save more money for medical expenses. Maximizing the amount of money saved in an HSA can be a huge benefit down the road.
When participants use their full HSA contribution limit, you can build up a safety net for any unexpected medical expenses or allow for increases in healthcare costs. Remember, funds in an HSA account never expire and roll over each year!
Although the increases for 2025 are not as significant as the changes in 2024, they still offer consumers an opportunity to reduce their tax burden and increase retirement savings.
Tips for Insurance Agents on Communicating the 2025 HSA Changes
Making sure your prospects, clients, and agents are aware of the upcoming changes to HSA contribution limits is crucial. But how can you get the word out effectively and efficiently? By using technology.
An industry-specific management platform, like AgencyBloc’s AMS+ solution, can help you communicate these changes effectively and efficiently. Quickly identify the affected prospects and clients, then create a mass email.
Having all your data in one location is also a huge benefit. Not only does this eliminate data silos, but your agents and staff have all the information they need to properly serve your prospects and clients and notify them of contribution limit changes. They can quickly see how many HSA products your company has sold and the policyholders who own those HSAs. This can be a great client retention tool — keeping your prospects and clients informed shows you care and that you are a trusted advisor.
In addition to communicating the 2025 HSA contribution limit changes, it’s also beneficial to touch on these bullet points with your agency’s clients:
- You must be enrolled in an HDHP that has an annual minimum deductible of $1,650 for individuals and $3,300 for families
- Annual out-of-pocket expenses can’t exceed $8,300 for individuals and $16,600 for families
- HSA funds don’t expire, even if you change jobs
- HSA funds can be used to cover a range of medical expenses such as dental, emergency medical, vision, first-aid kit supplies, contraceptives, and more
- In some cases, the money contributed to an HSA can be used for investments
Common Health Savings Account FAQs
HSAs can have many nuances and, along with that, questions about how they work. Knowing the answers to some of the most frequently asked questions is essential so you can serve your clients as best as possible.
What happens if an HSA participant leaves their job?
If you service groups, one question you often get is what happens to funds if an employee with an employer-based HSA leaves their job. The short answer is that HSA funds are tied to the employee, not the company. Therefore, if employees leave their jobs, their HSA funds go with them.
What can HSA funds be used for?
HSA funds can be used for a variety of health and medical expenses. Some examples include:
- Medical expenses: Surgery, laboratory fees, x-rays, etc.
- Dental expenses: Copays, crowns and bridges, dental sealants, etc.
- Vision expenses: Contact lenses, eyeglasses, optometrist services, etc.
- Other qualified expenses: Healthcare-related travel, family planning, wellness and substance abuse treatments, etc.
What happens if someone uses HSA funds for non-qualified purchases?
If an HSA participant uses HSA funds for a purpose other than a qualified health or medical expense, the purchase will be subject to income tax and a 20% penalty fee. However, if the participant is 65 or older, disabled, or deceased, the penalty fee does not apply. To avoid this, it’s essential to only use HSA funds for qualified expenses.
HSAs are a great healthcare option for many of your prospects and clients for many reasons, including their tax benefits. Because the contribution limits for these accounts change each year, it’s important to inform those affected so they know what to expect for their HSA funds in the coming year. But by using industry-specific technology, like AgencyBloc’s AMS+ solution, your team can make this process more manageable and more powerful.
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Posted
by Sarah Rosonke
on Thursday, December 5, 2024
in
Policy Renewal
- industry news
- open enrollment
- quoting
- selling
About The Author
Sarah is the Design and Content Specialist at AgencyBloc. She creates and designs helpful resources to support life and health insurance agencies in growing and automating their business. Favorite quote: "You'll never do a whole lot unless you're brave enough to try." —Dol
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