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Q) What is an HSA?
"HSA" stands for Health Savings Account. HSAs allow consumers to pay for qualified medical expenses with pre-tax dollars—meaning income-tax free—and save for retirement on a tax-deferred basis.
An HSA is tax-favored savings account that is used in conjunction with a high-deductible HSA-eligible health insurance plan to make healthcare more affordable and to save for retirement.
HSAs
are similar to individual retirement accounts (IRAs), but even better:
-
Pre-tax money is deposited each year into an HSA and can
be easily withdrawn at any time with no penalty or taxes
to pay for qualified medical expenses.
Withdrawals can also be made for non-medical purposes,
but will be taxed as normal income and are subject to
a 10 percent penalty if done prior to age 65.
- Any
HSA funds not used each year remain in the account, and
earn interest tax-free to supplement medical expenses
at any time in the future.
-
Like an IRA, the account belongs to you, not your employer.
But unlike an IRA, your employer CAN contribute to your
HSA.
Q) Why should I consider getting an HSA?
You
may save money in the short and long term by:
- Deducting
100% of your HSA contributions from your taxable income
-
Having the money in your HSA accrue interest and/or gains
on a tax-free basis
-
Paying no penalties or taxes when you use your HSA to
pay for qualified medical expenses
-
Having a high-deductible HSA-eligible health insurance plan, which typically has a lower premium than a plan with a lower deductible
Note:
Some HSAs charge a small monthly maintenance fee.
Q)
What are qualified medical expenses?
HSAs can be used to pay for many types
of medical expenses, even some that are often excluded on
health insurance plans. These include:
-
Health insurance plan deductibles, copayments, and coinsurance
- Prescription and
over-the-counter drugs
-
Dental services, including braces, bridges, and crowns
-
Vision care, including glasses and lasik eye surgery
-
Psychiatric and certain psychological treatments
-
Long-term care services
- Medically-related
transportation and lodging
Typically
HSAs cannot be used to pay health insurance premiums, although
there are exceptions for:
- Health
insurance premiums if you are receiving federal or state
unemployment benefits
- Premiums
for COBRA qualified health insurance
-
Certain qualified long-term care insurance premiums
- Premiums
for a health plan (other than a Medicare supplemental
policy) for an individual age 65 or older
Note:
You must establish an HSA before incurring any expenses
or the expenses will not qualify.
Q) What insurance plans are HSA-eligible?
In order to have a Health Savings Account, you must get an HSA-eligible health insurance plan. This type of insurance plan is often referred to as a High Deductible Health Plan, and typically has lower premiums than plans with lower deductibles.
A health insurance plan must meet the following criteria to be considered HSA-eligible:
-
The health insurance plan must have an annual deductible of at least $1,100 for individuals and at least $2,200 for families.
-
The sum of the annual deductible and the other annual out-of-pocket expenses required to be paid under the plan (other than premiums) does not exceed $5,500 for individuals and $11,000 for families.
To make things easy for you, our site identifies the HSA-eligible plans with the symbol shown below:
Note:
If you have other health insurance coverage (such as coverage under a spouse's employer-sponsored plan) in addition to your HSA-eligible health insurance plan, then the other plan must 1) also be HSA-eligible in order to contribute to an HSA or 2) the other plan cannot cover any benefits provided under your HSA-eligible plan.
Q) How much
can I contribute to my HSA?
Maximum yearly contributions (and associated tax deduction)
are determined as follows:
For individuals, it is $2,850, and for families it is $5,650.
You do not have to contribute the maximum each year, although some HSAs require a small minimum monthly contribution.
Note: If you are between the ages of 55 and 65, you can make an additional annual "catch up" contribution (of up to $800 in 2007.)
Q) Can I roll over funds from other accounts into my HSA?
You can make a one-time distribution from an IRA to fund your HSA, provided it doesn't exceed HSA contribution limits. Employees have the opportunity for a one-time, tax-free transfer of funds from their flexible spending account (FSA) or health reimbursement arrangement (HSA) to their HSA.
Q)
Is my money safe?
Funds in an HSA are held in a trust and are administered by a bank, insurance company, or other approved Trustee. This institution is often referred to as your HSA Administrator.
Funds in your HSA are invested at your discretion. Typically an HSA will allow you to choose from one or more of the following investment options:
-
Interest-bearing account
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CDs
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Money market funds
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Mutual funds
If you are looking to minimize your investment risk, you may want to consider an interest-bearing account; these accounts are FDIC insured. On the other end of the spectrum, mutual funds may provide a greater return, but are more risky, and are not FDIC insured.
Q) How
do I use my funds in my HSA?
Using
funds in your Health Savings Account is easy:
- Typically an HSA will provide you with a checkbook or debit card. When you pay for a qualified medical
expense, use the debit card or check to make the payment.
- You
do not need to get approval from the HSA administrator
when you use funds in your account.
-
You do not need to submit receipts to the HSA administrator,
although you should save them just as you keep receipts
for other items that are deducted from your taxes.
Note:
You must establish the HSA before you incur medical expenses otherwise the expenses will not qualify.
Q) What are my investment options?
Depending on which institution is the HSA Administrator for your Health Savings Account, you will be able to choose from one or more of the following investment options:
- Interest-bearing account
- CDs
- Money market funds
- Mutual funds
Because the range of your investment options is determined by the HSA Administrator you select, you should evaluate your options before setting up you account. Our site makes it easy to do this by presenting you with a link which allows you to view all your HSA Administrator options for each health insurance plan you are considering. Simply click the "HSA Options" link (illustrated below).
Once you find an insurance plan that meets your needs and has suitable HSA Administrator options, simply click the "APPLY" button to start the online health insurance application process. After completing the health insurance application, you will be able to select your HSA Administrator.
Q)
How do the tax savings work?
HSAs make it easy to save on your taxes:
- At
the end of each year, you will be sent a statement showing
the amount you contributed to your HSA that year. You
can deduct this amount provided it is less than or equal
to the maximum allowable contribution.
- Much
like an IRA, HSA deductions are "above-the-line"
and thus can be taken even if you do not itemize.
- If
you are self-employed, in addition to deducting your HSA
contributions, you may be able to deduct 100% of your
health insurance premiums, provided that:
- You are not eligible to participate in a subsidized health plan offered by an employer or your spouse's employer.
- The deduction does NOT exceed the amount of net income from your business.
Note: Check with your accountant or tax advisor for the specific federal and state tax benefits that apply to you.
Q) Are there fees associated with HSAs?
Depending on which institution is the HSA Administrator for your Health Savings Account, you may be subject to different fees, including: initial setup fee, monthly maintenance fee, and check fees.
Because the type and amount of the fees differs between HSA Administrators, you should evaluate your options before setting up your account. Our site makes it easy to do this by presenting you with a link which allows you to view all your HSA Administrator options for each health insurance plan you are considering. Simply click the "HSA Options" link (illustrated below).
Once you find an insurance plan that meets your needs and has suitable HSA Administrator options, simply click the "APPLY" button to start the online health insurance application process. After completing the health insurance application, you will be able to select your HSA Administrator.
Q)
Why Should I get my HSA through eHealthInsurance?
Here are just a few reasons to obtain your HSA through eHealthInsurance:
- We offer a broad selection of insurance plans, which makes it easy for you find an HSA-eligible health insurance plan that fits your particular needs.
- We clearly identify the HSA-eligible health insurance plans so that you won't select an insurance plan which is not eligible.
Q)
How can I get an HSA?
Health Savings Accounts (HSAs) are available to any person in the U.S. under the age of 65 who has an HSA-eligible health insurance plan.
So, to get an HSA, you need to do the following:
IT'S
EASY!
1.
Use our site to shop for an HSA-eligible health insurance plan. These plans are identified as follows:
2.
Start the online health insurance application process by clicking the "Apply" button for the insurance plan you select.
3. After completing the health insurance application process, select your HSA Administrator.
Q)
I want to see how much I can save with an HSA. Do you have an HSA calculator for me?
Yes. Below, you'll find a Tax Savings Calculator and a Retirement Savings Calculator designed to help you discover how valuable an HSA can be:
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