Health Savings Accounts What is a Health Savings Account(HSA)? A Health Savings Account (HSA) is a tax advantaged savings account, like an IRA, tied to a high deductible health insurance plan (HDHP). Your deposits into your HSA are tax deductible, your savings grow tax defered and can be withdrawn tax free to help pay your medical insurance deductible or other qualified medical expenses like prescriptions, vision or dental care. Health Savings Account contributions and interest earned carryover from year to year allowing you to build up your savings over time. You will never lose your savings or pay taxes as long as your HSA funds are used to pay for qualified medical expenses. If you elect to cancel your HDHP then you can no longer make contributions to your HSA, but you can continue to spend your savings on qualified expenses.   In order to set up an HSA it is required that you have a certain type of health insurance policy known as a High Deductible Health Plan or HDHP.  The Treasury Department stipulates that for 2009 a HDHP must have a minimum deductible of at least $1,150 for self-only coverage and $2,300 for family coverage. For 2010, the minimum deductible increases to $1,200 for self-only coverage and $2,400 for family coverage. The maximum out of pocket allowed on a HDHP in 2009 is $5,800 for self-only coverage and $11,600 for family coverage. For 2010 the maximum out of pocket amount increases to $5,950 for self only coverage and $11,900 for family coverage.   The Treasury Department has published an HSA Brochure for some additional information. For a more detailed description of Health Savings Accounts read All About HSA'S. Savings with a HDHP compared to a traditional PPO health plan? Plan example for a family: Plan Design: Family PPO Plan ($2,000 Ind./$6,000 Family Deductible, 70% Coinsurance, $40 office visit copay) Family HSA Plan ($5,800 Family Deductible, 100% Coinsurance, office visits discounted then subject to Deductible) Monthly Premium: $600 $400 Tax-deductible monthly HSA deposit (optional) not allowed $200 Total Monthly Cost $600 $600 Annual Cost For Health Plan $7,200 $4800 Annual Cost for HSA   $2,400 Annual Cost (premium for Health Plan plus HSA) $7,200 $7,200 Tax Savings (33% of HSA deposit)    $800 Total Cost of Health Plan and HSA account $7,200 $6,400 Your HSA account balance after one year (with no medical claims) None $2,400* If $3,000 of medical claims subject to the deductible are incured - out of pocket expenses for the claim. $2,300 $600 ($2,400 of claim is paid by the balance in the HSA account) Annual out of pocket expenses $9,500 $7,000 Annual Savings with the HSA Plan   $2,500                             Pay discounted Network fees with your HSA Dollars. With a High Deductible Health Plan (HDHP) you will gain access to a quality network of health care professionals and facilities in your area. Physicians and facilities in the network agree to a fee schedule which lowers the amount you pay for healthcare.  When you have any services rendered let the provider bill the insurance company to have the services discounted, then pay the balance to the provider with your HSA savings. All HSA administrators issue Mastercard or Visa debit cards that can be used to pay for your qualified expenses.   Savings will vary depending on the physician and the network and typically range from 25-40% off of the retail fees. Use you HSA savings to pay for qualified expenses including services not covered by your HDHP. Here are some examples of ways to use your tax free HSA savings for other qualified expenses that might not be covered under your HDHP. Dental treatment including braces and dentures. Vision care including exams, eyeware, contact lenses and cleaning solutions, and laser eye surgery. Chiropractic Care. Long Term Care Premiums (certain limits may apply). For a complete list of qualified expenses from the IRS see publication 502.  For a more detailed look at Health Savings Accounts and Tax favored plans please see publication 969. Will I ever pay taxes on money saved in my Health Savings Account? Money placed in your HSA is tax deductible. Your savings grow tax deferred and can be withdrawn tax free to pay for qualified medical expenses. There are limits on the amount of money you can place in your savings account. For the calender year 2009, the maximum for self-only coverage is $3,000. For families the maximum contribution is $5,950.  For 2010 the maximum for self only coverage increases to $3,050 and the family maximum contribution goes to $6,150. Beginning in 2007, individuals can make a one time transfer from their IRA to an HSA, subject to the contribution limits applicable for the year of the transfer. If you are age 55 or older, additional "catch up" contributions to HSA are allowed.  For 2009 it is an additional $1,000 and  will remain at $1,000 for all years forward.   Beginning in 2007 a special rule allows you to contribute the maximum amount for the year as long as you have a qualified High Deductible Health Plan (HDHP) in force by December.  However you must keep your HDHP in force for a minimum of twelve months for the IRS to allow the full contribution amount.  Contributions to the HSA in excess of the contribution limits must be withdrawn by the individual or subject to an excise tax. If a distribution is not used for qualified medical expenses, then the amount of the distribution is included as income, and there is an additional 10% tax.  The additional 10% tax would not apply when an individual dies or becomes disabled, or when an individual reaches age 65.  How do I get a quote for a High Deductible Health Plan? Click here for a free health quote. When you get to the quote page on the compare plans header click "HSA" under plan type. We represent several carriers with HSA plans to compare including Humana One, Golden Rule, Assurant, Aetna,  Coventry, Kaiser and Blue Cross.    When shopping for an HSA qualified High Deductible Health Plan is it important to note that most carriers offer discounted or limited benefit policies along with full comprehensive HSA health plans. The discounted plans are typically less expensive because of benefit limitations on the policy. For instance, Assurant offers the SaveRight HSA plan which limits outpatient care to $15,000 per year. This  benefit limitation helps Assurant to offer a lower premium, but if you were to get in an accident that required extensive outpatient  treatment you could easily reach your benefit limit. Assurant also offers the One Deductible HSA plan that may cost 20% more, but  the policy would cover outpatient services up to a lifetime maximum of 3 million! The discounted plans are an acceptable option as long as you are aware of any benefit limitations and are willing to accept the financial risks. Please contact our office when shopping for your HSA qualified health plan if you would like to discuss the differences in the plans offered. For maternity benefits to be included as a covered expense with a HDHP look at Blue Cross Blue Shield's HDHP's on a family contract, or Kaiser's HSA qualified plans. To see rates and benefits click on "Get a Quote" on the top banner. Health Savings Account Banking options. Once you have your High Deductible Health Plan (HDHP) in force you can then set up your Health Savings Account.     I would recommend checking with your local bank to see if they offer an HSA. That might make it easier for you to have all of your bank accounts with one bank.  Listed below are links to banks offering HSA's. Wachovia Bank of America BB&T  To research online banks click on the following links. HSA BANK OPTUM HEALTH BANK HEALTH EQUITY