What does HSA stand for?

HSA stands for Health Savings Account, which is a special type of money account you can use when you have a “HSA eligible” health insurance plan.  The money in a Health Savings Account can only be used for Medical Expenses.

Why use a Health Savings Account?

The reason you would want to use a HSA is because the money you contribute to it each year is income tax deductible.  The most you can put in your HSA per year is $3450 as a single individual, or $6900 as a family. You and your spouse may each contribute an additional $1000 if over age 55.

If you have Medicare parts A & B, you are ineligible.

The money in your Health Savings Account can ONLY be spent on medical expenses, including dental and prescription drugs.  If you don’t spend the money, it continues to grow interest until age age 65, at which point you can withdraw the money penalty-free.  Anytime you withdraw the money, it is income tax free if used on medical expenses.  If it is withdrawn not as a medical expense, income taxes must be paid, with additional penalty if under age 65.

A Health Savings Account can only be used in conjunction with an HSA eligible health insurance plan.

What is a “HSA eligible” health insurance plan?

In order for a health insurance plan to be HSA eligible, it needs to follow these rules in 2018:

  • The deductible on the health insurance plan must be between $1,350 and $6,650 for an individual, or $2,700 – $13,000 for a family.
  • The deductible must be met before coinsurances, copayments, or other cost-sharing are offered by the insurance company, including RXs.
  • The out-of-pocket maximum of the health insurance plan must be $6650 or less for an individual and $13,300 for a family

If a plan is HSA eligible, it almost always has “HSA” as part of the plan name.  If “HSA” is not a part of the plan name, you can bet that it is probably not HSA eligible.

If you do not have a HSA eligible health insurance plan, you cannot use your HSA funds for medical expenses without being taxed and with penalty.

Is a HSA and a HSA eligible health plan the right choice for me?

If you wish to avoid paying income taxes on money used for medical expenses, a HSA paired with a HSA eligible health insurance plan might be a good choice for you.  But if you don’t have the capability to save back money and contribute to an HSA account each year, then you might want to go with a health insurance plan that offers copayments before the deductible for doctor visits and prescription drugs.

For more information on HSA insurance plan options, contact us here.

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Categories: Health Insurance