Health Savings Account plans offer three ways to save money that traditional health insurance policies lack. First, since the plans include health insurance policies that have a deductible, the premiums are lower than standard co-pay policy premiums. For plans that are qualified to work with a Health Savings Account (HSA), deductibles range from $1,200 to $5,950 for individuals and from $2,400 to $11,900 for families this year.
Second, money contributed to an HSA doubles as a tax deduction to lower taxable income and typically federal and state taxes. Only a handful of states don’t follow the lead of the federal government in making HSA contributions tax deductible. There are limits on the deduction you can take, though. Individual contributions may be up to $3,050 and contributions to family Health Savings Account plans may be up to $6,150. If you’re 55 or older, you can add an extra $1,000 to your contribution annually.
Third, HSA contributions are not taxed when the funds are used to pay for qualified health care expenses regardless of your age. After you reach retirement age, you can continue to pay for health care with tax-free funds, but if you spend HSA money on other things, it will be taxed as you withdraw it. As long as the funds remain in the HSA, earnings are not taxed. These accounts enjoy the same kind of rapid growth that IRA funds share.
HSA Health Plans Cover Preventive Care Just Like Other Forms Of Health Insurance
Before health care reform, no preventive care services were covered until the plan’s deductible was met. When you purchase a policy after health care reform became law, standard and HSA health plans provide 100-percent coverage with two caveats. You’ll need to get the services from an in-network provider who must report it using a correct preventive care code.
The difference between HSA Plans and other kinds of health insurance stands out when you need a form of health care that’s not covered. It’s rare for health insurance to help when you go to the dentist, the chiropractor, an herbal therapist, a Christian Scientist healer, etc. You can use HSA funds to pay for all of those and more. Here’s another surprise: Health Savings Plans cover some people not listed on the insurance policy.
You can spend your HSA balance on qualified health care expenses for your spouse, same sex and domestic partner, or any dependent member of the family and they don’t have to be on the insurance policy that allowed you to set up the HSA.
High Deductible Health Insurance As A Health Savings Plan Is An Investment In Your Future
Traditionally, when policyholders pay insurance premiums, the insurer plans to collect enough from all members to cover most of the treatment anyone of them will need. You may have noticed that insurance companies continue to make a big profit in spite of rising health care costs. What do you think happens to premiums collected for people who need little health care?
Instead of paying an insurance company money you’ll never get back for something you might not need, you can invest in your own savings account. Use an HSA Health Plan to get the triple savings effect of tax-free earnings, tax deductions and lower health insurance premiums.
As your savings grow, raise your insurance deductible to lower your premiums. If you need to withdraw money for health care before the deductible has been met, it’s covered by your HSA balance. (Remember that preventive care is exempt from a deductible if you update your plan with a policy purchased after health care reform.)
If you don’t need to withdraw from your Health Savings Plan, the balance rolls over automatically each year like a retirement account to grow tax-free like an IRA. That’s how HSA Insurance shifts your investment from insurance company premiums to your own future.
Just as an example, if your employer is spending $12,000 a year on your health insurance benefit, you may or may not actually get all of that. If your employer changes to a lower-premium, high-deductible policy for $7,000 a year and puts $5,000 in an HSA in your name, you legally have $5,000 per year. If you don’t need it for health care, it’s an annual bonus that’s invested to earn without being taxed until you retire. It’s yours to take with you if you change jobs, too.