Generation Z: Why an HDHP with HSA makes sense

Generation Z – you’re young, you’re healthy, and you’re starting to make your presence felt in the workplace. But during benefits enrollment, you may feel overwhelmed. Don’t worry, because you aren’t alone. For many people, open enrollment can be pretty confusing.

Your employer is offering healthcare plans and tax-advantaged benefit accounts. With so much information, though, it’s hard to make a decision. Find out why a high deductible health plan (HDHP) coupled with a Health Savings Account (HSA) can be the right choice for you and your Generation Z colleagues.

Why a HDHP with HSA is right for Generation Z

Before we jump into why an HDHP and HSA are right for Generation Z, let’s cover the basics.

What is a high deductible health plan?

A high deductible health plan (HDHP) is health insurance plan that offers lower premiums in exchange for higher deductibles. The premium is the amount you pay for the plan coverage, and it’s often charged on a monthly basis.

The deductible is the amount you pay for claims until the insurance company kicks in its share.

The trade-off is this: you pay lower premiums up front, but if you have a lot of medical claims, you pay more out-of-pocket for those. However, if your claims are low, you get health insurance coverage for a more affordable price.

With a qualified HDHP, you can sign up for a Health Savings Account.

What is an HSA?

An HSA is a benefit account that lets you set aside money before taxes are taken out to pay for qualified healthcare expenses. HSAs have a triple tax advantage:

1. Contributions are not taxed
2. Withdrawals for qualified healthcare expenses are not taxed
3. Account interest and investment growth is not taxed

Other advantages of an HSA include ownership. You keep the account for life, even if you switch jobs or leave your employer. Plus, at the end of each year, any money that you don’t spend rolls over to the following year.

You can also use an HSA like a retirement fund. After age 65, you can withdraw the money for any use without penalty.

3 Reasons Gen Z and HSAs make sense

1. You’re young. You have four decades to set aside money in your HSA. With rollover and tax-free investing, you can build up a sizeable balance. That money can then be used down the road for healthcare expenses or in retirement.
2. You’re healthy. Generally speaking, healthy people don’t see the doctor very often or have to pay for a lot of recurring prescriptions. Without a lot of healthcare expenses, you can save a lot of money.
3. You’re career mobile. Like Millennials, Generation Z is likely to be career mobile. Early in their careers, young people tend to switch employers more often than in their 30s and beyond. Since you own the HSA, it will move with you, no matter where you work. There is one caveat – you can only put money into an HSA while you’re enrolled in an HDHP. However, you can continue to use the money even if you don’t have HDHP coverage.

During enrollment, compare your employer’s healthcare coverage offerings. With a qualified HDHP, you can enroll in an HSA and both save a lot of money on healthcare now and save money for retirement later. For more information, talk to your HR or benefits administrator.