Health Savings Accounts are designed to compliment high deductible group and individual health insurance policies. HSA qualified health insurance policies are popular as they offer some of the lowest monthly rates.
Owners of a qualified major medical policy can setup their health savings account at any number of financial institutions. Funds contributed to a HSA are tax deductible (up to yearly limits), grow tax-deferred and can be withdrawn tax-free to pay for a long list of qualified medical expenses.
We work with several HSA qualified health insurance providers including Aetna, Anthem Blue Cross and Blue Shield, Coventry, Humana, Golden Rule, United Healthcare and Medical Mutual of Ohio. In fact, there are more than 25 million consumers enrolled in HSA plans as of 2018.
With our agency, you can compare HSA qualified plans coupled with major medical insurance and enroll direct. We help our clients understand these unique accounts so they can take advantage of their lifelong tax benefits.
Group and HR administrators, please contact us here for group HSA, HRA or FSA quotes.
There are only a few criteria that must be met to participate in a HSA plan. First, individuals or employees must be enrolled in a qualified high deductible health insurance plan. Such plans will be clearly advertised as HSA compatible.
An annual deductible of at least $1,350 for an individual policy or $2,700 for a family plan must be selected. The insured can choose to establish a health savings account at the financial institution of their choice or through one affiliated with their insurance company.
The maximum out-of-pocket limit is $6,650 and $13,300 for individual and family HSA qualified plans respectively in 2018. The catch-provision for those 55 and older remains at $1,000. Using the catch up provision, both spouses could deposit an additional $1,000 in their HSA each year after age 55.
Not counting the catch-up provision, the maximum HSA contribution amount for 2018 is $3,450 for individual coverage and $6,900 for family plans. Both the individual and family amounts are the same as last year. As inflation has picked up some, we would expect these amounts to rise in 2019.
Dollars contributed into a HSA are considered pre-tax by the IRS. In this way, a health savings account works much like an Individual Retirement Account. The contributions are tax deductible and grow tax deferred. Unlike an IRA, monies can be withdrawn from your HSA tax-free for qualified medical expenses.
Savings and money market accounts are most commonly used for HSA contributions. Some plans offer mutual funds as an investment option. Of course, market related instruments will add risk and can deplete health savings accounts due to market fluctuations. Investment losses are not tax deductible. It is best to shop around for a HSA provider offering the best terms. Your HSA and health insurance policy do not need to be with the same company.
You are not taxed on any interest or fund appreciation in your HSA account as long as funds are withdrawn for qualified medical expenses. The IRS has a long list of what is considered a qualified medical expense, but it can be something as simple as paying for a doctor’s office visit, meeting the deductible and coinsurance amounts or dental work.
Unused dollars in a HSA plan roll-over year to year and always belong to the insured. The plans are portable, meaning the contributions are not lost should the underlying health insurance coverage later be discontinued. The insured owns all deposits and can name a beneficiary for the accumulated value.
Should you later cancel your health insurance or no longer need a HSA plan, the accumulated funds can be withdrawn. All funds that have not been spent on qualified medical expenses would be taxed as ordinary income under these circumstances.
Funds do not need to be withdrawn immediately upon cancellation of the insurance plan, however. Some account owners use their accumulated HSA funds to purchase long term care insurance. LTCi plans are deemed a qualified medical expense by the IRS.
Once age 65 is reached, most consumers discontinue their individual and/or family health insurance plans, opt into Medicare and purchase Medicare insurance plans. Funds remaining in a HSA would not need to be withdrawn lump sum at this time either. The IRS allows owners to pay for Medicare Parts A, B and D premiums. Unfortunately, you cannot use an HSA to pay for Medicare supplement insurance.
Recently passed legislation allows for lump sum contributions by account holders up to the listed yearly maximums. Policy owners may transfer tax-deferred dollars from a qualified plan like an IRA (Individual Retirement Account) in order to immediately fund an HSA. Employer plans will allow account owners a one time transfer from a FSA or HRA plan.
Health Savings Accounts are designed to be easily maintained and operated. HSA specific websites are setup by the insurance providers so that account holders can manage their deposits and expenditures online. In addition, many insurance companies issue checkbooks and/or credit cards to the insured that draw directly from the account.