What Is An HSA?

HSA stands for Health Savings Account. It has two components:

  1. A qualified high deductible insurance plan (a.k.a. HSA Plan), and
  2. a savings account.

Why Are HSAs SO Popular?

Because they offer subscribers:

  1. Lower premiums
  2. A Single Deductible
  3. Great TAX benefits

HSA Plan

HSAs differ from the traditional PPO plans. With a traditional plan a subscriber usually has a $25 Dr. Copay, a Drug Copay, and a deductible.  These are great plans, but they cost more and the money used for copays doesn’t apply to the deductible.

However, with an HSA plan there are no Copays. Everything is paid out of pocket. This might sound bad, but there are some real perks. First, every dollar you spend at the Dr’s office or on prescriptions goes towards your deductible. This makes it easier for you to reach the deductible. Second, even though you don’t get a copay, you do get the discounted rate that the insurance company has negotiated with the M.D. or hospital. The savings can be up to a 50% discount! This helps the consumer become better shoppers of Health Care. Many times we get tests we don’t need or buy name brand prescription drugs when we could buy the generic ones for around $15. When the consumer pays out of pocket, they learn to become better shoppers of health care.

Savings Account

The savings account is probably the best part of the HSA. The account is separate from the plan and costs about $3 to $5 a month extra. But the benefits are outstanding!

With the savings account, every dollar that is put into the account (up to the annual max) is 100% TAX deductible. This money then grows TAX free in the account! When a deduction is made, it doesn’t matter if it is principle or interest, it is TAX free if it is for a qualified expense. What is even better is that the account balance rolls over every year without taxes or penalties.

The annual contribution limits in 2010 are $3,050 for singles and $6,150 for families. Plus, if you are 55 years or older you can contribute and extra $1,000. If you are a family and you max out your contribution that means that you will have a $6,150 deductions off of your gross income on next year’s taxes. Remember, that money will grow tax free!

What is considered a qualified expense from your savings account? You can use the money in the account for all of the following;

  • Ambulances
  • MD Visits
  • Dental Work
  • Orthodontics
  • Birth Control Pills
  • Braille Books and Magazines
  • Chiropractor Visits
  • Acupuncture Visits
  • Prescriptions

And much more… A whole list can be found in IRS Publication 502.
It is important to note that there are taxes and penalties if the money is taken out for non-qualified expenses. So make sure you only use the account for qualified medical expenses.

If you would like more information on HSAs call us at 361-993-8888. You can also get instant quotes on our website www.seamancompanies.com

More HSA information in my next post.

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