The ABCs of HSAs (Health Savings Accounts)

The following information is offered by eKaiserInsurance as a basic introduction to a very significant tax preferred program that anyone with insurance (and especially anyone planning to buy insurance) should be aware of. A complete treatment of the subject by the Department of Treasury can be found at www.treas.gov/offices/public-affairs/hsa/about.shtml.
To hear all about HSAs in plain English, call one of our specialists at 1-800-915-0501

HSAs………………Are they for you? (Very likely)

Health Savings Accounts became allowable under legislation signed into law by President Bush in December of 2003. For a government program, they are remarkably straightforward.

Simply put, an HSA is a tax advantaged savings account opened at any bank or authorized financial institution. So, it’s YOUR money. Qualifying individuals (more on this below) can put aside up to $2,850 (for self coverage), or $5650 (family coverage) every year and claim the sum as an “above the line” tax deduction (it does not count towards income, in other words) come April 15. These amounts are going to be indexed annually.

It can all go in at once, or monthly, weekly, etc. Employers can make the payment for employees and an individual can put the money aside for someone else’s health benefit. The money can earn interest and anything that remains at year’s end (more below), rolls over annually. One time IRA transfers into HSAs are legal after 2007.

The catches (Not that bad, really)

The money is only tax free if used for a “qualifying health expenditure”. However, any expenditure that would be covered under a standard insurance policy (and a lot that would NOT, like OTC meds, eyeglasses, etc.) are fair game.

A “qualifying individual” MUST have a “High Deductible Health Plan” (HDHP) in place (Kaiser Permanente offers three such plans, go to http://www.ekaiserinsurance.com/choosePlan.asp for more and a free quote).

The HDHP must have a minimum deductible of $1,100 ($2,200 for families) and “out of pocket” cap $5,500 and $11,000, respectively. However, just to make it a little bit confusing, there ARE elements of HDHP coverage that CAN be exempted from deductible requirements (in other words, “first dollar payments) that do NOT disqualify an individual from taking the HSA tax break (mostly preventative procedures and programs).

If you use the money for something OTHER than a qualifying medical expense (like buying a car), it becomes taxable, and, if you are under 65, there is a 10% penalty. After 65, you would only incur the tax on the amount spent.

It is very possible to accrue hundreds of thousands of tax free dollars by age 65 (remember, they will need to be spent on health care, but as we all know, it’s the “elder years” where the big medical costs generally start to kick in).

There’s a bit more to it, but that’s the basics. Check out the Treasury Department Link, above, or call us for more detail (1-800-915-0501)

While the concept is fairly easy to grasp, deciding whether an HSA is for you and your family depends on your unique subset of circumstances (age, relative health, location, employer participation, and of course financial means) To aid you in the consideration process, our company offers online quote resourcing (http://www.ekaiserinsurance.com/zipcode.asp?d=quote as well as personal, no obligation telephone counseling at 1-800-915-0501. Since we are cross trained in financial and tax planning as well as insurance brokerage, we can quickly and accurately evaluate your precise circumstances and see if you fall into the group of millions of Americans who will be “Saving for a Healthy Future” with HSAs. Call us today.

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