Posts Tagged health saving account
Features of Health Savings Account (HSA)
One unique as well as interesting feature of an HSA is that the money in the HSA account can be invested in similar ways to how money in an IRA account can be invested. The same kinds of rules and restrictions apply to HSAs in regards to investing money as well as deferring taxes on earnings.
* All earnings on investments in an HSA account are non-taxable for as long as the money stays in the account or is withdrawn for the purpose of paying medical expenses.
* If earnings are withdrawn for non-medical purposes, and the owner is under the age of 65, then taxes will have to be paid on the withdrawals.
* Because contributions to an HSA are made with pre-tax dollars, it gives you the ability to reduce your income taxes.
Combining an HSA with a HDHP also gives the account owner the ability to use funds in the HSA account to pay for their annual health insurance deductible and to pay for medical expenses that their policy doesn’t cover.
There are limits to the amounts to the amounts you can contribute to HSAs in one year. The limit for individuals is $2,850 and for a family it is $5,650.
An HSA has more extensive coverage for medical expenses than most conventional health care plans. The coverage may include the following:
* Preventative health care visits
* Physical therapy, including chiropractor visits
* Mental therapy, including psychiatry, psychotherapy and psychology
* Dental treatment
* Maternity expenses
* Prescription and nonprescription drugs
* Alternative health care for procedures like acupuncture and homeopathy
* Travel and accommodation expenses that relate to health care
HSAs are potentially a great option for individuals and families who want to have a high degree of flexibility in their health care that they can manage on their own without being required to visit network health care providers or complete lots of paperwork.
The ability for owners over the age of 65 to use the funds in the account for both medical as well as non-medical purposes means that an HSA, unlike many other types of health insurance plans, can benefit practically anyone, including individuals that have medical expenses on a continual basis as well as healthy individuals that do not have a lot of ongoing costs.
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Health Savings Accounts
If you are considering changing your health insurance policy, you should be aware of the alternative of a Health Savings Account (HCA).
Health Savings Accounts started to become available (and legal) in 2004, allowing people with high-deductible insurance policies to set aside tax-free money to fund medical expenses up to the maximum deductible amount.
If you don’t have to use the funds, it rolls over every year. Once you reach age 65, you no longer are required to use it for medical expenses, although you certainly can; you can withdraw funds under the same conditions as a regular IRA.
Although you will be penalized if you use the funds for non-medical expenses prior to age 65, you can use the money for vision care, alternative medicine or treatment and dental care.
For 2008, an individual may fund up to $2,900 tax free. The maximum deductible would be $1100 and the maximum out-of-pocket cost would be $5,600.
For a family, the maximum tax-free contribution is $5,800 with the maximum deductible of $2,200 and the maximum out-of-pocket cost would be $11,200.
Health Savings Accounts are certainly a viable way to shelter income while providing catastrophic insurance coverage in light of the high cost of low-deductible health insurance plans.
For healthy people, it deserves some research. Consult with your insurance agent for all of the details involving this approach to managing your insurance needs.
Tags: health saving account