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Is 2020 the Year to Start a HSA?

Open enrollment for health insurance through the Exchanges begins on November 1st. For many employees covered by group health plans at work, open enrollment for 2020 may already be underway.

During open enrollment, this is an opportunity to consider your options and evaluate the benefit and tax savings offered through opening a Health Savings Account (HSA).

How a HSA Can Save You Money

Workers and many private individuals will soon need to make decisions about their health insurance coverage for 2020. In a lot of situations, individuals are allowed to choose between several types of plans with different deductibles, co-pays and provider networks. These choices have a direct bearing on the monthly insurance premium.

One option becoming increasingly popular is a qualifying high-deductible insurance plan. Because the policy-holder is willing to take on more of the financial risk for medical expenses, the insurance company will offer a lower monthly premium. For an individual or family with a relatively healthy outlook, the high-deductible plan can result in a significant savings of premium dollars.

These plans also open up an opportunity for a covered individual or family to set aside dollars in a Health Savings Account (HSA), and deduct those contributions on their Personal income tax return. Not only does a HSA yield immediate income tax savings, but the earnings and growth in the account remain tax-free so long as the money is used to pay for medical expenses.

To qualify for a HSA, the minimum deductible under the plan for 2020 must be $1,400 for self-only coverage, and $2,800 for family coverage. In addition, the plan must limit the maximum out-of-pocket costs to $6,900 for self-only coverage, and $13,800 for family coverage.

Assuming the insurance plan meets this criteria (those that do will usually contain a notation such as "HSA-Eligible"), the individual or family can setup and make tax deductible contributions to the HSA. For 2020, the funding limitations will be $3,550 for an individual, and $7,100 for a family. Depending on where the HSA is setup, investment options can include savings accounts, money market funds and mutual funds.
The potential for lower insurance premiums, income tax savings and tax-free growth makes the HSA worthy of consideration as part of your insurance, financial and retirement planning.
Be sure to call or drop us an email if you have questions.

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