Health Savings Accounts Are for Everyone (Almost!)

Affordable Care Act

Health Savings Accounts Are for Everyone (Almost!)

Published on December 23, 2015


A lot of price conscious health insurance shoppers these days find themselves forced into health plans with high annual deductibles. That’s because plans with more affordable monthly premiums just tend to have higher deductibles.
What a lot of these folks don’t know, however, is that many of today’s high-deductible health insurance plans can be used with Health Savings Accounts (HSAs).
Using an HSA to its full potential can help mitigate the risk of a high deductible by allowing you to save money on a tax advantaged basis to pay for a whole host of qualifying medical expenses.
Here are a few things you should do if you have a high deductible plan or if you’re considering a high-deductible plan during the current open enrollment period for 2016 coverage:

Find out if your plan is HSA-eligible.

For 2016, if your health insurance plan has an annual deductible of at least $1,300 for individual coverage or $2,600 for family coverage, it’s probably eligible for use with a Health Savings Account. Your insurance company or licensed agent can confirm for you.

Open a Health Savings Account.

If your plan is HSA-eligible, the insurer may be able to help you open a Health Savings Account. Otherwise your bank or another financial institution can help you open one. Shop around to compare annual fees (they should be minimal) and find the best deal.

Contribute as much as you can toward your HSA.

In order to contribute toward an HSA, you must be currently enrolled in an HSA-eligible, high-deductible plan. Unlike the Flexible Spending Accounts (FSAs) that many people used to have through their employers, money contributed to your HSA is yours to keep and can roll over and grow from year to year.
Contribute as much as you are able, or as little as you like. But be aware that there are annual limits to contributions. For 2016, the contribution limit is $3,350 for individual coverage or $6,750 for family coverage.  Contributions to your HSA are deductible on your federal tax return.

Use your HSA funds for qualifying medical expenses.

The first and most important thing anyone with a high-deductible health plan should know is that funds from your HSA can be used to pay for your annual deductible.
That’s why people who are worried about their high deductibles should try to contribute as much as they to their HSA – at least enough to cover their deductible in case of serious illness or emergency.
There’s a whole host of other things you can use HSA funds for, such as copayments, dental care, vision care, etc. For a complete list, refer to IRS Publication 502. Note that you cannot use HSA funds for pay for your monthly premiums.

  • Beware of penalties for using HSA funds for other purposes. HSAs are designed to provide you with special tax treatment for funds used for qualifying medical expenses. If you use funds from your HSA to pay for something else, you will face a 20% penalty tax from the IRS.


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