Health Savings Accounts
A Health Savings Account is an alternative to comprehensive health insurance; it is a savings vehicle that allows people a different way to pay for their health care. HSAs enable you to pay for current health expenses and save for future medical and retiree health expenses on a tax-free basis. You use HSAs in conjunction with traditional health insurance policies as long as the policies are "high deductible" policies.
You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. The minimum deductible to qualify is $1100 for individuals and $2200 for families. HDHPs usually cost less than traditional health care insurance, so the money that you save on insurance can therefore be put into the Health Savings Account.
You own and you control the money in your HSA. You decide how to spend the money without a health insurance company telling you what to do. You also decide what types of investments to make with the money in the account in order to make it grow. "Tax Relief and Health Care Act of 2006" was passed by both houses as Congress in December and signed into law by President Bush on December 20, 2006. When he signed the law, Bush said it was estimated that 3.6 million HSAs had been opened.
Watch a presentation about HSAs
Contributions
The maximum yearly contribution for 2009 is $3,000 for an individual and $5,950 for a family. The maximum HSA contribution is pro rated based on the number of months of the year that you are eligible.
People over age 55 can make "catch-up contributions" in addition to normal contibutions. The limit for catch-up contributions is $1,000 in 2009. The maximum annual out-of-pocket amounts for HDHP is now $5,800 for individuals and $11,600 for families.
The government is also allowing a one-time-only rollover of Flexible Spending Accounts into HSAs and a once-in-a-lifetime rollover of IRA funds into an HSA (subject to annual HSA contribution limits.)
Eligibility for Health Savings Accounts
To be eligible for a Health Savings Account, you must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. You are only allowed to have auto, dental, vision, disability and long-term care insurance at the same time as an HDHP. You may also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are also permitted if they do not pay significant medical benefits.
The policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible for an HSA even if the policy is in your spouse’s name.
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You cannot establish and contribute to an HSA unless you have coverage under a HDHP.
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You are not eligible for an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot continue to make contributions to an HSA after you enroll in Medicare. If you received any Veterans Administration benefits in the past three months, you are also ineligible to contribute to a HSA.
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If you are someone else's dependent
- You can't have an HSA if you are considered a dependent on somebody's tax return.
Disqualifying Insurance Coverage
Even if you have a HDHP, you can still not be eligible for HSAs if you are covered by another insurance policy. For instance, if your spouse has traditional health insurance and you are covered under that, you can't contribute to a HSA.
You can, however, have some sorts of insurance, including insurance for accidents, long-term care, and dental care. You can also have Flexible Spending Accounts and Health Reimbursement Accounts if they are for limited purposes and reimburse expenses covered by the HDHP after the deducible.