You might purchase a health insurance policy that can be coupled with a health savings account simply to obtain lower monthly premiums. In exchange for covering more of the incidental expenses out of pocket with a HSA qualified plan, you can keep your individual or family health insurance more affordable.
Perhaps of more importance are the tax write-offs that accompany the contributions to your health savings account. Up to certain individual and family HSA yearly limits, you can write off all contributions. And of course, your deposits grow tax deferred based on the current internal rate of return or other chosen investment strategy in your account.
All withdrawals from a Health Savings Account are tax free so long as they are used for what the I.R.S. refers to as qualified medical expenses. In order to take full advantage of the tax savings afforded by your HSA, you need to know what constitutes a qualified medical expense.
The I.R.S. considers several products, procedures, programs and equipment to be qualified. Listed below is a sampling of both expenses large and small. For a full list, please visits the I.R.S. website and search form 502.
This is a long list, but not all inclusive. There are several other items that qualify as medically necessary expenditures that you can pay for with the funds in your health savings account.
It makes little sense to save money in your HSA if you are not later using the funds to pay for approved expenses. If you later closed your HSA, then all the funds that had accumulated in your account would be distributed as taxable income once withdrawn. If you have not been using your account for even the smallest of expenses, then you are not taking full advantage of the tax savings.
Of course, you may only wish to save enough to meet your deductible or coinsurance amounts should you ever need to pay them. However, it is fiscally responsible to save more than these combined amounts and withdraw your accumulated funds for any and all approved medical expenses.
You may like the lower health insurance premiums associated with a HSA, but are not sure about creating the actual savings account. It is a good idea to go ahead and setup the account with a local bank or one affiliated with your chosen health insurance company.
Even if you decide to put in a minimal amount, only for the purpose of creating the account, you can later fund your HSA retroactively. For example, if you setup a HSA with $50, but then later had $2500 in medical expenses, the account would already be created and could later be funded before paying the anticipated doctor and/or hospital fees.
If you have not setup and funded your HSA, then you would not be able to write off the anticipated expenses that had already occurred. Thus, it is wise to at least create and then fund your account with a small amount. You can later add to it if needed.
There are no rules stating that you must setup a HSA if your health insurance coverage allows for it. Your monthly premiums would only pay for the health insurance itself. Any funds deposited into a health savings account are in addition to the monthly premiums with the insurance company.
Hyers and Assoc. is an independent insurance agency serving several states and providing health insurance quotes and enrollment services direct. We represent many national carriers including Aetna, Anthem, Assurant, Medcial Mutual, Golden Rule, Humana, United Healthcare and others.
Contact us for more information about health insurance plans offering a health savings account.