Advantages of a Health Savings Account (HSA) Eligible Health Insurance Plan
One of the more popular health insurance options among individuals, families and employers are the Health Savings Account (HSA) eligible plans. An HSA is essentially a savings account with the sole purpose of covering medical expenses. Because HSA contributions are 100% tax deductible, accumulating interest is tax-deferred, and withdrawals to cover qualified medical expenses are not subject to tax, more individuals are moving their health insurance coverage toward HSA plans than any other type of policy.
More often than not, an HSA eligible plan is going to be a high deductible health insurance plan. Traditional health plans offer a copayment structure toward the cost of office visits, hospitalization, prescriptions, etc. However, under a high deductible HSA eligible plan, the HSA is intended to cover such expenses, and do so at a low monthly premium. Not only are HSAs used to meet the specified deductible, HSAs can also be used for services that may not be covered by a health insurance policy, such as dental and vision care, disability and long term care.
Listed below are some frequently asked questions regarding HSA rules:
Are there HSA contribution limits?
Yes. Every year the IRS releases updated HSA contribution limits. The maximum HSA contribution for 2010 is $3,050 for individuals and $6,150 for families.
If one should exceed the maximum HSA contribution for the year, that excess amount is subject to tax as ordinary income and 6% excise tax.
What are the tax benefits associated with an HSA?
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Most common expenses related to health care are covered by HSAs; however, see IRS code, section 213(d) for details: http://www.usu.edu/hr/files/uploads/213%28d%29eligiblemedicalexpenses.pdf.
Also, see IRS Publications 502 and 969.
What happens to unused HSA contributions?
If at the end of the calendar year a member has money left over in his/her HSA, that money rolls over into the next year. As well, if an HSA owner changes high deductible policies or banking institutions, that person can roll the HSA over to a new carrier and/or bank.
At age 65 an HSA owner can withdrawal funds for any reason without penalty, aside from paying income tax for those non-related medical expenses.
Can an HSA be used to pay health insurance premiums?
No. This would qualify as a non-medical withdrawal and would be subject to tax and penalty.
Are there HSA management fees paid to the banking institution?
Yes. Just as you would pay fees for a regular savings account, HSA owners are subject to the same conditions. Management fees might include:
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For more information regarding HSAs and how an HSA can benefit you and your family, please feel free to contact a licensed independent health insurance specialist of Chaser Insurance Group at (513)217-9491 or (877)775-4321. You can also reach an agent by email at AF@HealthInsuranceChaser.com.
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