Health Savings Accounts (HSA)


A Health Savings Account (HSA) is a new, portable, savings account that allows you to set aside money for health care tax-free. You must have high deductible health insurance to open an HSA. Different from other benefit products, an HSA rolls over from year to year (there is no "use it or lose it"), interest is paid, money can be invested in mutual funds, and it is owned by you, not your employer.

Considering the high costs of health care today, an HSA offers a wide range of benefits to consumers.

Key Features of a Health Savings Account (HSA)

Affordable Health Insurance
You pay less each month for high-deductible health insurance.

Triple Tax Advantages
Contributions to your HSA are tax-deductible, tax-exempt investment earnings on your HSA, and tax-free withdrawals from your HSA for qualified medical expenses.

Unprecedented Control
You are now in control of how your healthcare dollars are used — save or spend, it's your choice.

Portable
Your HSA is an account that you own and remains in place regardless of where you work or what insurance company you are insured by.

Flexibility
Your HSA contributions can be used to pay for a wide range of eligible medical expenses not typically covered by low deductible health insurance or other healthcare accounts.

Planning for the Future
HSA contributions can be directed toward long-term investment vehicles, such as mutual funds, to maximize future value of your HSA.

Yearly Savings Amounts
HSA contributions can be made in a lump sum or in any amounts or frequency you wish. Individuals 55 and older who are covered by an HDHP can make additional catch-up contributions each year. To qualify to open an HSA, your HDHP has to have a minimum deductible and your annual out-of-pocket expenses (including deductibles and co-pays) are limited.

Maximum Contribution Amount Catch-up Contribution Minimum Deductible Maximum Out-of-Pocket
2013 2014 2013 2014 2014 2014
Single $3,250 $3,250 $1,000 $1,000+ $1,250 $6,250
Family $6,450 $6,450 $1,000 $1,000+ $2,500 $12,500

+ These amounts will be adjusted for inflation annually.

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HSAs in Practice

HSAs can help individuals and families reduce healthcare costs while saving for the future. Here are some theoretical examples:

    Female in New York
Name: Sarah
Location: New York, NY
Marital Status: Single
Occupation: Self-employed Fashion Stylist
Annual Income: $50,000
Deductible: $3,100
Current Healthcare Status:
Sarah has no major planned health expenses, only preventive care (covered by insurance under her deductible).
Result:
Sarah pays $150 per month for her health plan premium. She contributes $100 per month into her HSA. She spends the money in her HSA, tax-free, on acupuncture treatment and contact lenses.
   Male in Florida
Name: James
Location: Orlando, FL
Marital Status: Single
Occupation: Technology Developer
Annual Income: $90,000
Deductible: $3,100
Current Healthcare Status:
James is planning on getting LASIK surgery in the next few years and intends to use his HSA to pay for the service.
Result:
James' employer contributes $200 per month into his HSA. He contributed $700 at the beginning of 2012 into his HSA (so that he could reach the maximum contribution of $3,100 by year-end). He does not spend money out of his HSA, and instead pays out of pocket for occasional visits to a chiropractor.
   Family of Four in Iowa
     
Name: Townsend Family (Ages 41 and 39)
Location: Cedar Rapids, IA
Marital Status: Married
Children: Two, ages six and eight
Occupation: Retail Store General Manager
Annual Income: $80,000
Deductible: $4,000
Current Healthcare Status:
Mr. Townsend has diabetes, takes medicines and also sees a specialist regularly. Additionally, one of the Townsend children has chronic asthma.
Result:
Mr. Townsend's employer contributes $250 per month into his family's HSA and Mr. Townsend contributed an additional $1,000 in the beginning of 2012. The Townsends pay out of their HSA for all doctor's visits and medications until they have met their insurance deductible, at which time their insurance covers almost all additional expenses.
   Married Elderly Couple in California
Name: Welch Family (Ages 60 and 55)
Location: Irvine, CA
Marital Status: Married
Children: Grown
Occupation: Mrs. Welch (primary insured) works at a law firm
Annual Income: $150,000
Deductible: $3,000
Current Healthcare Status:
Mr. Welch has a chronic illness that requires he purchase expensive medicine and see specialists regularly.
Result:
Mrs. Welch's employer contributes $1,200 up front into her family's HSA. Mrs. Welch contributes $1,800 up front into her family's HSA and another $900 for her "catch-up" contribution. Mr. Welch's costly doctor visits and medications are not paid out of their HSA. They meet their insurance deductible quickly and insurance covers almost all additional expenses for Mr. Welch's treatments. They are saving all the money in their HSA for planned health retirement expenses.

 

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