Health Savings Accounts (HSAs) are a new
way to make monthly health insurance premiums more affordable
and to build savings tax-free for health care needs. For many,
HSAs can make the difference between having health insurance
or not.
| Anyone can open an HSA who chooses a health
insurance policy that has a yearly deductible of at least
$1050 for individuals and $2100 for families. By paying
a slightly higher deductible, HSA enrollees will benefit
from: |
| • |
lower monthly premiums; |
| • |
the opportunity to accumulate tax-free savings in an
account reserved for health-related expenses; |
| • |
a choice of investment options, from interest-bearing
savings accounts to mutual funds; |
| • |
a savings plan that they own and can be carried from
job to job, and into retirement. |
| |
|
| |
| HSA Questions and Answers |
| |
|
Who may establish a health savings
account?
|
| • |
Workers under age 65 can accumulate tax-free savings
for health needs throughout their lifetime if they participate
in a high-deductible health plan (HDHP). |
| |
|
|
What is a high-deductible health
plan?
|
| • |
An HDHP has a minimum deductible of $1050 for individuals
and $2100 for families. There must be a limit on how much
a consumer will ever have to spend out-of-pocket: a $5000
cap on co-pays and insurance for individuals, $10,000
for families. |
| |
|
|
Why would I want to pay a higher
deductible for my health insurance?
|
| • |
Policies with a slightly higher deductible are often
available at a more modest cost to individuals. Data from
eHealthInsurance, an online broker selling health insurance
policies from numerous carriers, indicate that 56% of
all purchasers (both individuals and families) of high
deductible plans paid less than $100 per month, and 89%
of all purchasers paid less than $200 per month for insurance
coverage. |
| |
|
| • |
Because health plans with higher deductibles have lower
premiums, individuals and families will be able to translate
this premium savings into contributions to a Health Savings
Account. These accounts allow workers to build money for
medical expenses in an account they own that will go with
them from job to job and into retirement. |
| |
|
|
Will I be protected
if I have significant or catastrophic health expenses
in a given year?
|
| • |
The tax-free savings permitted by Health Savings Accounts
should finance significant medical expenses until the
high deductible has been met. HSAs provide a vehicle to
set aside money tax-free for medical expenses during years
of good health, so that a sudden illness will not impose
a significant financial burden on a family or individual. |
| |
|
|
Will I have to pay up-front for
preventive services like mammograms and annual physicals?
|
| • |
No. Preventive services for both individuals and
families are not subject to the deductible. Insurance
plans may cover preventive services both before and
after a deductible has been reached.
The Treasury Department recently published guidelines
on preventive care benefits and HSAs, which can be found
by visiting http://www.treas.gov/offices/public-affairs/hsa/pdf/notice2004-23.pdf.
|
| |
|
|
Who may contribute to a Health
Savings Account?
|
| • |
Individuals, their employers, and their family members
can contribute to an HSA tax-free. HSAs now offer small
business owners a new way to give their employees assistance
with health care costs. Some employers previously unable
to afford to pay their employees’ health insurance
premiums due to rising costs can now help their employees
by contributing to their HSAs.
Employers wishing to learn more about how they can
contribute to their employees’ HSAs can visit
http://www.dol.gov/ebsa/regs/fab_2004-1.html
to view the Labor Department guidelines. |
| |
|
|
How much can I contribute to my
HSA each year?
|
| • |
Annual contributions may total up to 100% of the health
plan deductible, with a maximum annual contribution of
$2700 for individuals and $5450 for families. (These figures
will be indexed annually for inflation.) |
| |
|
|
When and on what can I use my HSA
funds?
|
| • |
HSA enrollees use tax-free funds to pay for many
health care services, including:
• Expenses not covered by their insurance policy;
• Health insurance premiums during periods of
unemployment; and
• Long-term care insurance. |
| |
|
| • |
HSAs also allow enrollees to purchase services that
may not have been covered by their health plan –
such as dental and vision treatments (including orthodontia)
– with pre-tax dollars.
To view the Treasury Department’s guidance regarding
the definition of qualified medical expenses, visit
http://www.irs.gov/pub/irs-pdf/p502.pdf.
|
| |
|
|
Will the contributions I place in
an HSA remain in the account from year to year?
|
| • |
Yes! The enrollee owns the account, and the savings
follow the enrollee from job to job and into retirement;
enrollees can also bequeath their HSAs to spouses tax-free. |
| |
|
|
Have HSAs reduced the number of
uninsured Americans?
|
| • |
They have. Recent reports on HSAs show that as many
as 40% of HSA purchasers were previously uninsured.
CAHC has compiled a report containing additional information
on who
is buying HSAs.
|
|
| |
|
|
Benefits of HSAs
|
| • |
HSAs will encourage individuals to choose plans that
best suit their health needs, purchasing only the amount
of coverage that they consider necessary. Individuals
are rewarded for being cost-conscious with their medical
decisions because they use their own dollars and reap
the benefit of what they save. |
| |
|
| • |
Contributions to the HSA are made from pre-tax dollars,
and payments from the HSA are tax-free if used for qualified
medical expenses. |
| |
|
| • |
Assets belong to the individual; funds in an HSA
can be carried from job to job and into retirement.
For more information from the Treasury Department regarding
HSAs, visit http://www.treas.gov/offices/public-affairs/hsa/
|
| |
|
| Groups of the uninsured
for whom tax credits would be helpful: |
| Working
Americans |
| Small
Businesses |
| Self-Employed |
| Young
Americans |
| Minorities |
HSAs offer a variety of unique benefits,
including more choice, greater control, and individual ownership.
A new study of purchasers of Health Savings
Accounts shows that these health care financing arrangements
are appealing to those who previously were shut out of the
insurance market, to families, to older Americans, and to
workers of all income levels.
