What is an HSA Plan?
Health Savings Accounts and High Deductible Health Plans
HSAs At-a-Glance
An HSA is a PPO Plan with a high deductible up front that is IRS approved to be
used with a tax advantaged account.
Positives
- Tax sheltered savings account
- Better coverage after a deductible
- Some wellness built in before deductible
Negatives
- You may have co-pays after deductible
- More risk upfront than with HMO or PPO
- You pay 100% of costs before deductible
Popular Individual HSA Plans
Health Savings Accounts (HSA's)
Health Savings Accounts (HSA) are also known as High Deductible Health Plans (HDHP).
THe HSA portion is a tax-sheltered accounts similar to IRAs. Instead of saving money
tax-free for retirement, these accounts save money tax-free with interest for health
expenses. They are available to any person who participates in a High Deductible
Health Plan (HDHP).
Most HSAs are available through employers. When an HSA is elected, the employee
makes regular pre-tax contributions through their paycheck. Some employers may choose
to match a percentage of this. The money is then available to the employee to cover
certain health-related expenses. Unlike Flexible Spending Accounts, the money in
the account will be there after the end of the year.
Here are some of the Frequently Asked Questions concerning HSAs and HDHPs:
HSAs offer an enormous amount of flexibility. They may be used to pay for non-standard
medical treatment like acupuncture, chiropractic treatment, and LASIK surgery as
well as over-the-counter medications, travel costs to and from the doctor, and durable
goods like hearing aids, glasses, and orthotics.
HSAs give you more control over your healthcare dollars, but you must be ready to
document your expenditures by keeping receipts and other records. Otherwise, you
may be penalized for non-approved expenditures. You must also be comfortable with
a high deductible.
An HDHP is a health insurance plan which provides coverage with a relatively high
deductible – the amount you must pay before coverage begins. For the year 2009,
the IRS has defined a high deductible as a minimum of $1,150 for an individual and
$2,300 for a family. Once the deductible is met, the insurance covers a specific
percentage of health costs minus a co-payment or co-percentage paid by the insured.
Most plans have an out-of-pocket maximum. Once the insured has spent a certain amount
in a year, the insurance company covers all further costs.
Any person who is a member of an HDHP is eligible for an HSA. Many employers provide
HSAs, and individuals or self-employed can set up their own.
Health Savings Accounts (HSAs) allow individual to save money tax free in an interest-bearing
account similar to an IRA. Many employers offer these accounts as a benefit, allowing
the money to be deposited pre-tax. Once deposited, the money is immediately available
for qualified medical expenses, including doctors, dentists, optometrists, psychologists,
physical therapists, prescription drugs, durable medical goods, and travel expenses.
Yes. Because they come with higher deductibles, HDHPs often have lower monthly premiums.
You can deposit these premium savings into an HSA bank account to earn a new tax
deduction and use these funds to pay for qualifying medical expenses tax-free. Unused
funds in your account will roll over from year to year and may be saved and invested
for retirement. Consumers across the nation are using their HSAs to save thousands
of dollars per year toward their future medical expenses or retirement.
HSA Plan Example:
For this example, we will look at a family making enough money each year to be taxed
in the 28% bracket. They have an HDHP with a $5000 deductible. They decide to open
an HSA to save money on their taxes
Their employer takes their insurance premiums out before taxes, so those are not
included in this calculation. The family chooses to have a total of $5000 taken
out over the course of a year so they can cover the deductible. Because the HSA
deduction is taken pre-taxes, they pay nothing extra.
However, if they were trying to pay the deductible out of pocket, they would have
to come up with $5000 after taxes. Instead of $5000 pre-tax, they would
pay $6944 in pre-tax money to get $5000 after taxes. Now, if the family keeps all
their receipts and itemizes their taxes, they'll get that money back, but if they
take the general deduction, like 2/3 of us, that money is gone forever!
And this doesn't include the interest HSAs earn during the year.
Back to
HSA's.
Most Popular Individual H.S.A. Plans: Nationwide Plan X 1750, Aetna
Plan 2 HDHP
Some of the most popular HSA savings account administrators are through the following
banks, Wells Fargo, Exante Bank, Sterling HSA, First Horizon MSA
Plan Types
