Health Savings Account - All You Need To Know
Health Savings Accounts or HSA - What Are They?Health Savings Accounts (HSAs) are individual insurance savings accounts.
They are used for eligible medical expenses and you must have a high deductible health insurance.
There purpose is to provide people with more choices and control over their health insurance. They are funded with pretax dollars. The funding can be by the individual, her employer, or combination of both.
Health Savings Account Qualifications
Enrollment in a health savings account must meet certain health savings account qualifications. The most important qualification is enrollment in a high deductible insurance plan. Since your are paying a bigger chunk of your health care cost, the insurance company will offer you very low premiums on your insurance.
You can have very low monthly premiums if you are willing to pay these high deductibles.
There is a minimum deductible in your insurance plan for it to be an eligible plan.
In 2011, the insurance plan must have a minimum deductible:
However, even though there are minimum requirements, deductibles can be $1,500 all the way up to $10,000.
Health Savings Account Benefits
Health Savings Accounts (HSAs) allow you to set aside money tax free to pay for health insurance. Basically, an HSA is a medical insurance savings account. It is not in itself insurance. You deposit money into an account designed to pay your medical insurance high deductible. This money is tax free and can be used to pay high deductibles on low cost health insurance.
Health Savings Account RulesHealth savings accounts are governed by certain rules and are regulated by the IRS.
Health Savings Account Rules include:
You must be in an IRS qualified health plan, to establish a HSA account and to be able to use pretax dollars.
Health Savings Allowable Expenses
There are also health savings account qualified medical expenses. Eligible expenses include almost all health care costs and drugs.
Health savings eligible expenses in 2011 Include:
One great thing with this account is if you do not get sick, all the money you put in this account is yours. It is unlike other plans where you pay higher premiums whether you get sick or not. In the meantime, HSA allows you to pay a fraction of the cost of other insurance plans and you are fully covered beyond your deductible.
Other Health Savings Account Guidelines
There are other health savings account guidelines relating to Health Savings Account limits. Some of those guidelines include the maximum annual contribution that is allowed.
In 2011, the maximum contributions were as follows:
Health Savings Account Obamacare
The Patient Protection and Affordable Care Act was signed into law on March 23, 2010 by President Barack Obama. Since then it is commonly called “Obamacare” by many people. After it became the governing health care law, there have been wild speculations on its effect on health care and how it affects cost. Also of particular importance here is how Obamacare affects Health Savings Accounts. In an effort to clear some of the cloudiness, a few facts are noted and some logical conclusions are drawn below. There is one fact about Obamacare which stands above all in its relationship to health savings accounts. That fact is:
Persons in the lower income brackets are offered some government subsidies and assistance to make this possible.
The wild assumptions on the effect on health savings accounts (hsa) run the gamut.
However, the logical assumption or rather logical conclusion as it relates to an hsa is:
Obamacare will drive massive amounts of uninsured to enroll in Health Savings Accounts.
The reasons for this sane prognostication are as follows:
Health Savings Account ProvidersAn HSA must be approved by the IRS.
So too must the Health Savings Account Providers or Health Savings Account High Deductible Health Plan Providers do. Health Savings Account Providers include financial institutions like banks and other financial service providers.
When your contributions to your account reaches a certain balance, they are also allowed to be enrolled in eligible mutual funds.
Health Savings Account QualificationsHealth Savings Account Qualifications are enshrined in law and managed by the IRS. Qualifications include:
Health Savings Account Tax Deduction
Tax deduction is one of the benefits of a health savings account.
Money that you use to fund your health savings account is triple tax free.
Health Savings Account VS PPO
PPOs or Preferred Provider Organizations and HSAs both are intended to provide lower cost insurance to persons.
However there are some significant differences.
Health Savings Account Penalties
The many health savings account uses and rules concerning health savings account distribution also carries penalties.
The rules require all HSA expenses to be documented and reported on your annual tax return.
Violations are subject to the following penalties.
After age 65, you can withdraw from your HSA for non-eligible medical expenses without the 10% penalty.
However, if it used for non medical expenses, it is still subject to ordinary income tax.
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