Advantage Insurance & Financial Services, Inc.

Home    Feedback    Contents    Important Disclosures   Privacy Notice    Legal Notice

HEALTH SAVINGS ACCOUNTS

Request Quote Now

Health Savings Accounts (HSAs) are one of the most advantageous ways for millions of Americans to purchase their medical insurance coverage.  They are also one of the most misunderstood and underutilized options available.  

WHO SHOULD CONSIDER AN HSA?

• Small business owners (< 50 employees) and self-employeds who:

  • Are in good health without prior conditions that are likely to result in on-going claims

  • Want to control escalating medical insurance costs

  • Want MORE freedom of choice over their medical providers

  • Want to take control of their personal medical expenditures

  • Need to reduce taxable income

  • Wish to cover expenses frequently not insured by normal medical plans; e.g. routine checkups

How they work - With a Health Savings Account (HSA) you divide the money you would normally spend for full coverage medical insurance into two parts:

        PART ONE:    You purchase a high-deductible medical insurance plan (defined by Federal law) to cover the large medical bills.  

        PART TWO:    The remainder of the money you would normally spend on medical insurance premiums can be put into a personal savings account.  All monies put into the savings account are tax deductible AND earn tax-exempt interest.  These funds are yours to use either for paying out-of-pocket medical costs, or you can simply save it.  The maximum amount of money you can put into your savings account is determined by the Type of Coverage, you've chosen, as follows:

*NOTE: There is only ONE DEDUCTIBLE for an entire family.  It IS NOT a per person deductible!!

*Figures shown apply to new and existing policies for the year 2009

**NOTE:  Interest earned on the HSA deposits is tax exempt!

How you Can use accumulated MEDICAL SAVINGS ACCOUNT funds

1. Are all Health Savings Account Plans alike?  NO.  Some plans are restricted Medical Savings HMO Plans which require the patient to only use the managed care company's contracted doctors.  The original intent was to have these plans allow a patient freedom to control which providers they desired.  The HMO type HSAs were a later development.  AIFSI only offers those HSAs that allow total freedom of choice to the insured.

2. Can I go to the doctor of my choice?  YES.  AIFSI only offers those HSAs that allow you to choose any physician you wish.

3. Can money from my Health Savings Account be used on medical expenses that do not count as covered expenses under my insurance policy?  YES.  This is one of the big advantages of an HSA health plan.  Most people spend a considerable amount of money every year for medical expenses that are not paid by their insurance plan.  Frequently this is because such expenses are either 1) not a covered expense (e.g. routine physicals, dental work, vision exams), 2) applied to deductibles and copayments, or 3) represent charges exceeding the insurer's reasonable and customary limits.  Unless your employer provides Flexible Spending Accounts, these amounts are being paid with AFTER-TAX dollars.  With the HSA these expenses can be paid with tax-free funds taken from your Health Savings Account.

4. What kind of medical expenses qualify for the favorable tax treatment?  Eligible medical expenses under the Health Savings Accounts are all those permitted under the IRS code.  See Publication 502: Medical & Dental Expenses.

5. Can I use funds from my Health Savings Account for non-medical expenses?  Yes, BUT any money withdrawn prior to Age 65 and used for non-medical purposes is subject to income taxes and a 15% federal excise tax.

6. What happens to any money left in my Health Savings Account that is not spent?  It simply stays in your account earning tax-exempt interest!

7. If I'm able to accumulate a lot of money in my HSA can it be used to supplement my retirement income?  YES.  At age 65 your HSA will function much like an IRA.  You can simply withdraw money without penalty, paying only normal income tax.  After retirement, you can also withdraw the accumulated HSA savings TAX-FREE to pay out-of-pocket medical expenses, including nursing home care and expenses not covered by Medicare.

8. Can I have a Health Savings Account without the qualifying high-deductible medical insurance?  NO.

9. Do the deductible and/or savings deposit maximums ever change?  YES.  By law, the deductible limits must change each year to reflect changes in the Consumer Price Index (CPI).  These changes apply to both new and existing policies.  Maximum deposits to the Health Savings Account will also change as a result.

10. When I first start an HSA medical insurance plan can I immediately make a full years lump sum contribution to my Health Savings Account?  Generally NO.  If your medical insurance plan is effective January 1st, the answer is yes, because there are 12 full months remaining in the calendar year.  However, this is rarely the case.  The amount that can be contributed to the Health Savings Account is pro-rated by the number of months remaining in the calendar year; e.g. if your policy is effective July 1st, you could make a lump sum contribution for the year equal to the maximum annual contribution divided by 12 months times 6 months remaining in the calendar year.

11. Must I always contribute to my Health Savings Account?  NO.  You must always pay the premium portion for your high-deductible medical insurance to keep it in-force, but contributions to the Health Savings Accounts are totally discretionary.  However, some companies do require that contributions must be some minimal amount, such as $500 if made in a lump sum, or $50 per month.

12. Can I change insurance carriers for my high-deductible plan without affecting my Health Savings Account?  YES.  If you change insurance carriers, the funds in your Health Savings Account are normally transferred to the new company without any penalty; i.e. similar to the rollover of an IRA account.

13. If I do not qualify for a Health Savings Account plan now, will they be available in the future?  That's not clear at this point.  The Internal Revenue Service established a pilot program for HSAs that was due to expire, but has been extended several times. 

14. What happens to the money in my Health Savings Account, if I die?  You name a beneficiary when the account is established and all funds will go to that beneficiary.  If the beneficiary is your spouse, they can continue the HSA for themselves.  Any other beneficiary will be taxed on the value of the funds received.

15. If I was unable to make my maximum contribution to the Health Savings Account by the end of the calendar year can I go back and catch-up for a prior year?  YES.  The IRS will allow you until April 15th to fully fund your Health Savings Account for the prior year.

Send mail to information@AIFSI.com with questions or comments about this web site.
Copyright © 2001-2010 Advantage Insurance & Financial Services, Inc. - ALL RIGHTS RESERVED