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More Americans Are Signing Up For HSAs.
The number of Americans with HSAs has tripled from one million in March 2005 to the more than three million reported in January 2006. The number of Americans with HSAs is currently projected to increase to 29 million by 2010.
What Are HSAs?
Established by the Medicare reform bill President Bush signed into law in December 2003, HSAs allow Americans to save tax-free dollars to pay for near-term medical expenses and save for future longer-term costs. Accounts are accompanied by an HSA-qualified insurance plan covering major medical expenses and preventive care. HSA-qualified insurance plans are an alternative to traditional health insurance policies and have lower premiums and higher deductibles. Savings from lower premiums can be put toward funding the HSA.
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High Deductible Insurance – H.S.A. Eligible
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Health Savings Account – Tax advantaged account
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Give you control of your Healthcare Decisions
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Allow you to save for retirement
Who Is Eligible For HSAs?
To be eligible for HSAs, individuals must be covered by an HSA-eligible Insurance Policy first.
HSA-qualified insurance policies Affordable insurance plans that protect individuals and families in the event of major medical illness. These plans generally provide the same benefits as traditional insurance policies, including prescription drug coverage, doctor's visits, emergency room visits, and hospitalization. However, they require that a higher deductible be met before benefits are paid. The higher deductible allows the insurance company to charge significantly lower premiums. The deductible must be at least $1,050 for individuals or $2,100 for families, and the annual out-of-pocket expenses cannot exceed $5,250 for an individual or $10,500 for a family, including the deductible and co-payments (but not premiums) (Click here)
Open a *HSA Account with a Financial
Institution
People with HSA-eligible plans can open up their account with banks, credit unions, insurance companies, and other approved companies. Employers may also set up plans for employees. More information is available on the Treasury Department website at http://www.treas.gov/offices/public-affairs/hsa/faq.shtml.
How Much Can Be Contributed To An HSA Annually
For 2006, Americans can contribute up to $2,700 per year for individual coverage or up to $5,450 per year for a family. However, annual contributions cannot exceed the deductible of the HSA-compatible insurance policy. For example, if the deductible is $1,100, not more than $1,100 can be contributed that year. Both individuals and employers can contribute to HSAs. Money unspent one year rolls over into the next year. Americans age 55 or older (and not yet enrolled in Medicare) can make additional "catch-up" contributions of up to $700 per person this year, which can provide extra help to many early retirees. Fund your Health Savings account with pre-tax dollars, and reduce your taxable income. Withdraw funds tax-free to pay for qualifying medical expenses. What you don't spend grows from year to year.
HSAs Provide Americans With More Control Over Health Care Costs.
Americans own and control the money in their HSA. They decide how to spend the money in their account on their own health care needs, and they keep what they do not spend. HSAs can make health insurance more affordable and help businesses lower health care costs. With an H.S.A. the patient and the Doctor make the decision regarding the course and type of treatment, not some third party. H.S.A. funds can be used to pay for a variety of medical expenses, including optical, dental and prescriptions! With a H.S.A. you get the treatment you need, when you need it. You are in Control
Eligible Medical ExpensesEligible medical expenses are defined as those expenses paid for care as described in Section 213(d) of the Internal Revenue Code. Additionally, the IRS has allowed some over-the-counter drugs to qualify as eligible medical expenses. ¹ HSA Bank™ has created the following lists to help you determine whether an expense is eligible or not. The lists are provided with the understanding that HSA Inside is not engaged in rendering tax advice. These lists are to serve as a quick reference. For more detailed information, please refer to IRS Publication 502 or contact a tax professional. |
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Allow you to save for retirement: Any money deposited to the H.S.A. is tax deductible, grows tax deferred and can be withdrawn tax free to pay for insurance deductibles and covered medical expenses. If you don’t spend the money it continues to grow year after year.. just like an IRA.
Example
Insurance Plan H.S.A. Eligible (family) 5000. Deductible
H.S.A Insurance Plan 3000. Premium
H.S.A. Annual Premium $3000. X 35% = Tax Savings $1,050
H.S.A. Account Contribution $5000. X 35% = Tax Savings $1,750
Total Tax savings $2,800
H.S.A. Insurance Plan $3000.00
Tax Savings $2,800.00
True Insurance Cost = $200.00 per year
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