Health Savings Accounts help consumers take control over their medical treatment and expenses, and reward them for being frugal and managing their funds wisely. Physicians and hospitals also lower costs since they are now in competition for budget-minded patients. It has worked very well with more than a million personal accounts opened in the last 10 years. Future legislation should continue to provide added tax incentives and credits for both high and low-income households. Although the Affordable Care Act is being partly or fully replaced by Trump Administration options, HSAs will continue to be offered, and will feature more robust coverage. Wellness credits and additional tax incentives may be offered by 2019.
These types of plans are available through top insurers such as Aetna, UnitedHealthCare, Humana, Kaiser, Cigna and many of the Blue Cross Blue Shield companies. Typically, Health Savings Accounts rates feature substantially lower pricing than most medical plans, and provide a great alternative to traditional coverage. If major medical protection is your priority, and non-preventive office visits and prescriptions are rarely used, this type of plan could potentially save thousands of dollars in premiums. Carriers negotiate large network discounts that are passed along to you. Note: If you are claimed as a dependent by another person, you are not eligible.
We quote coverage at the lowest costs published by each carrier and we also help you find the best prices in your area. In most states, you can purchase these types of policies “on” and “off” the Marketplace. If your household income qualifies for a federal subsidy, an “on-Exchange” plan would be appropriate. If you can not qualify for government financial aid, them an “off-Exchange” contract may be more suitable. Both high-income and lower-income households can benefits from an HSA. The longer you stay healthy and avoid major claims, the more money you can potentially save on a tax-deferred basis.
By utilizing the “Get Free Quotes” button at the top of the page, you will be able to easily view your options. Both high and low deductible options can be compared, along with various coinsurance options (0%, 10%, 20% and 30% are the most common). Although the deductible should always be considered, the maximum out-of-pocket expenses and availability of network providers in your area also should be reviewed. It’s also important to ensure that you enroll in an HDHP contract, before creating the “savings” account.
What Is An HSA?
It is an inexpensive medical policy that becomes your healthcare. It is an account that allows you to pay for your expenses and also save money for anticipated future qualified medical, dental and vision expenses on a tax-free basis. “A High Deductible Health Plan” (HDHP) works with an HSA and provides the major medical protection. Since an HDHP typically costs less than a standard plan, the savings can be deposited into the Health Savings Account and accessed at any time. Withdraws and deposits can be made online, via telephone, or through mail. Since deposits are pre-tax, your taxable income can reduce, as it does for an employer-sponsored 401k or a traditional IRA.
But you do NOT have to set up the account since it is optional. However, if you choose to open one up, check with your local bank or credit union first, since they may waive any small setup fee or monthly maintenance charge. Many large national banks (such as Chase) make it easy to open up an account online. If you agree to receive all correspondence online (instead of by mail), most or all fees are waived. Otherwise, the monthly maintenance fee will be about $3. These accounts are FDIC-insured, although many investment options are not, including mutual funds.
What Are Some Features Of An HSA Including Maximum Contribution Limits?
An HSA allows you to reduce your federal income tax by depositing funds into an account that you own. As previously mentioned, typically, a bank of your choice is used, and the current maximum contribution for 2017 is $3,400 for individuals and $6,750 for families. Each year, the amount can increase. 2016 maximums were $50 lower. You do have to use the money for “qualified” expenses to be able to declare the tax deduction. Funds spent on non-medical, dental, or vision expenses will be disallowed for the deduction. Costs of non-prescribed drugs and vitamins also can not be deducted.
The minimum deductible allowed is $1,300 for an individual and $2,600 for a family. Maximum out-of-pocket expenses were also bumped up in 2017 to $6,550 and $13,100. There is a $1,000 “catch-up” contribution allowed if you are 55 or older. The $1,000 amount typically does not increase each year since it is not attached to any inflationary indexes. Any use of non-medical expenses inside the contract can result in a 20% penalty. The “catch-up” is highly recommended for upper-income households.
Also, preventive benefits are not subject to a deductible on the insurance portion. So although you would present your ID card at the time of treatment for a routine annual checkup, your provider will be reimbursed 100% and thus, no bill will be sent to you. OBGYN visits, baby well-check, and mandated diagnostic testing is also included with all copays and coinsurance waived. However, resulting complications or newly-discovered medical conditions may result in some out-of-pocket expenses.
Other expenses will often receive a “negotiated network repricing” that can substantially reduce your out of pocket costs. This reduction can be as much as 50% or more, especially on laboratory tests or X-rays. Office visits tend to receive a smaller discount of approximately 10%-25%. If you need an MRI, for example, you often save more than $1,000. It’s not uncommon to see a an inpatient hospital visit receive a cost reduction of several thousand dollars.
As previously mentioned, you can also get some favorable deals with banks when you use them for setting up the separate account. And often, membership fee reductions from health spas and exercise establishments are made available. Initiation and set-up expenses may be reduced or eliminated, and ongoing monthly payments (YMCA, JCC, spas etc…) may also be positively impacted.
How Does National Healthcare Reform Affect An HSA?
In March of 2010, Congress spared the tax break that HSAs offer. Legislation, in fact, made make them more popular than ever, especially if you are eligible for little or no tax subsidy from the government. These contracts have been in existence since 2003 and remain very popular. One minor change is that over-the-counter medicines are no longer a qualified expense that can be paid from your HSA. This eliminated the deductibility of vitamins and many generic drugs that changed from prescription to over-the-counter.
It is assumed that HSA qualified plans will continue for many more years. And although there is still much debate in Congress regarding the future of “The Affordable Care Act,” even with a major shakeup in Congress, tweaking the legislation is much more likely than an outright repeal. President Trump has indicated that he will enhance the popularity of HSAs with several new changes. Increased tax deductions are a possibility. Note: The Supreme Court ruling in June of 2012 did not change the future of HSAs and all other plans remained in place. We don’t expect future legislation to challenge the legality of the tax deductions, although the Affordable Care Act will undoubtedly undergo modification.
Can You Have An HSA Without Having An HDHP In Your Own Name?
Yes. As long as you are covered under an HDHP, you can become eligible. Of course, you would have to meet the other requirements. It is very common to have an HSA while your HDHP is in your wife or husband’s name. And of course, your dependents can be included on the policy. There is no specific advantage in putting them on separate policies, since it may lead to a slightly higher premium. However, it is possible to have one spouse covered on an employer-provided plan, while the other spouse and dependents are covered under an HSA.
When the children leave the contract (reaching age 26), they can take out their own plan. They also will not have to wait for Open Enrollment at the end of a calendar year since they would likely qualify for an SEP (Special Enrollment Period). If they voluntarily terminate benefits for no specific reason, they may not be eligible for immediately choosing another policy. Depending on their employment situation, a group policy may be offered. Also, dependents and spouses that are terminated from existing coverage, can choose short-term or limited-benefits plans. Although inexpensive, these policies may not provide the needed medical protection resulting from a large claim.
Is An HSA The Same As A Flexible Spending Account (FSA)?
There are similarities. Both contracts allow you to pay for qualified medical expenses with your pre-tax dollars. However, with an FSA account, any money in the account unspent at the end of the year is gone. Thus, many persons are forced to spend funds late in the year, on unneeded items. Thus, it’s not unusual to purchase several unneeded pairs of glasses in December, or risk losing funds. With your HSA, you don’t lose the money if you don’t spend it and you can withdraw funds at any time. And if you need money fast, you can write a check for the amount that you need. You can also deposit larger amounts of money, in anticipation of an upcoming surgery or procedure.
Are You Allowed To Have Multiple Accounts?
You are allowed to have more than one HSA and you may also contribute into many accounts. However, your maximum contribution limit does not change and there are no tax advantages to having multiple accounts. In fact, in most situations, it’s better to stick with one contract to avoid paying any excess fees. Generally, each account will be assessed approximately $2-$4 per month in monthly maintenance charges. Also, if you have a Group plan through your employer, an additional medical plan can not be purchased, unless it is a supplementary or ancillary product.
What Medical Expenses Are IRS-Qualified?
Section 213(d) of the Internal Revenue Code provides the definition of “qualified.” Some of the most commonly-used expenses include:
Contraception (prescription only)
Drug addiction treatment
Hospital (inpatient and outpatient)
Postnatal and prenatal treatment
Weight loss treatment
What Happens When You Become Eligible For Medicare?
Once someone is enrolled in Medicare, they can not contribute into an HSA. However, any unused funds may be used to pay for qualified medical expenses that are not covered under Medicare or a Medicare Supplement policy. And if you have built up thousands of dollars in the account, it may last quite a while! Often, your out of pocket expenses (after age 65) are much smaller than they were prior to age 65 because of the availability of Medigap and Medicare Advantage plans.
Also, if you haven’t reached age 65 yet and need temporary medical coverage to get you there, gap information can be found on this page. There are many available options, regardless if you need short-term or long-term coverage. If you become Medicare-eligible in the middle of the calendar year, you do not have to wait for October Open Enrollment to purchase a Medigap plan. Once you have enrolled in Parts A and B, you can choose a supplement, Advantage and/or Part D prescription drug coverage.
October 2014 – The end of the year is always a good time to check your beneficiary designation. If you don’t have a beneficiary named, it can be changed at any time. If your husband or wife is the beneficiary, the HSA contract stays in tact. If a spouse is not listed, the contract ends upon death and money is immediately dispersed.
May 2015 – 2016 HSA contribution limits have been announced and published by the IRS. The maximum contribution for an individual will be $3,350 while $6,750 will be the family maximum. A High deductible health plan (HDHP) must have a minimum individual deductible of $1,300 or family deductible of $2,600 to meet qualification requirements.
Annual out-of-pocket expenses in 2016 are also limited to $6,550 for individual coverage and $13,100 for family coverage. Typically, deductibles, coinsurance and copays represent the majority of out-of-pocket costs. However, the premium paid for the policy is not counted.
March 2017 – 2017 contribution limits have increased to $3,400 for individuals, and $6,750 for families. Minimum deductible requirements have not changed. Annual out-of-pocket maximums have also not changed. 2018 and 2019 contribution limits may increase, with added flexibility.