HSA? What, Why, and Who? #ACA
Today I'm going to talk about Health Savings Accounts (HSAs).
A Health Savings Account is a special bank account that allows you to put in money tax free which you can then use for medical expenses. These expenses include dental and vision care - pretty much anything for your body except over-the-counter medications and insurance premiums. There are limits to the amount of money you can put in an HSA each year. For 2019 those limits are $3500 for an individual or $7000 for a household.
HSA funds can come from you or from an employer. The funds are owned by you and do not "expire", they can roll over from year to year. You can put in money little bits at a time or in a lump sum. The limits are the amount you can put in per year - not the total in the account. This allows people to save up for planned medical expenses like having a baby or an non-emergency surgery. Once you reach 65 you can use the money for other things without penalty (you will pay the taxes tho).
In order to be allowed to set up an HSA account you need to be enrolled in a High Deductible Health Plan (HDHP). This means the deductible per person must be at least $1500/year and there are no co-pays or co-insurance until you meet that deductible. This is called having no "first dollar coverage". Your annual exams can still be covered 100% before you meet that deductible. If a health plan meets these requirements it is considered to be HSA qualified and you can open that account. An HSA qualified health plan can be a PPO, HMO or EPO network - drives me crazy when I hear a HSA compared to a PPO! If you later have a different type of health plan you can still use the money in your account - you just can't add to it.
With the increase in standard deductions in the new tax law fewer people will itemize deductions for medical expenses. An HSA allows a tax deductions for medical expenses outside of those standard deductions (I am NOT A TAX PERSON - please consult a tax professional for details).
Some people get very uncomfortable with having no co-pays at the doctor or for medications but this can often save you money if you look at your total year's expenses. The max out of pocket for HSA qualified health plans is lower than other health plans. This is not a good solution for everyone but it might work for you. Not sure? Let's talk!