Frequently Asked Questions from MyHSALink.com
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What are the 2008 Deductible & Contribution Limits?
What is an HSA?
How does an HSA work?
Who can have an HSA?
What are the benefits of an HSA?
Is an HSA plan the right choice for me?
What are the 2008 Deductible & Contribution Limits?
The Treasure Department has released the 2008 HSA limits.
| Maximum HSA contributions are as follows: |
| Individuals |
$2,900 |
| Families (two or more) |
$5,800 |
| "Catch-Up" contribution |
$900 |
The 2008 HSA Qualified health plan requirements are as follows:
| Minimum Deductible limits: |
| Individuals |
$1,100 |
| Families (two or more) |
$2,200 |
| |
| Maximum Out of Pocket limits: |
| Individuals |
$5,600 |
| Families (two or more) |
$11,200 |
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What is an HSA?
A health savings account (HSA) is a tax-favored savings account created for the purpose of paying medical expenses.
- Tax-deductible
Contributions to the HSA are 100% deductible (up to the legal limit) — just like an IRA.
- Tax-free
Withdrawals to pay qualified medical expenses are never taxed.
- Tax-deferred
Interest earnings accumulate tax-deferred, and if used to pay qualified medical expenses, are tax-free.
- HSA money is yours to keep
Unlike a Flexible Spending Account, unused money in your HSA isn’t forfeited at the end of the year; it continues to grow, tax-deferred.
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How does an HSA work?
An HSA works in conjunction with high deductible health insurance.
Your HSA money can be used to help pay the health insurance deductible and qualified medical expenses not covered by the health insurance, including dental and vision.
Any funds you withdraw for non-qualified medical expenses will be taxed at your income tax rate plus 10% tax penalty.
If you meet the deductible with covered expenses, the health insurance pays remaining covered expenses in accordance with the terms and conditions of your particular plan.
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Who can have an HSA?
The individual must be:
1) Covered by high deductible health insurance;
2) Not covered under other health insurance;
3) Not enrolled in Medicare; and
4) Not another person's dependent.
Exceptions. Other health insurance does not include coverage for the following: accidents, dental care, disability, long-term care, and vision care. Workers’ compensation, specified disease, and fixed indemnity coverage is also permitted.
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What are the benefits of an HSA?
High Deductible Health Plan:
- Costs less than more traditional copay plans
- Provides quality health insurance
HSA Savings:
- Used to meet your deductible
- Tax deductible off of gross income
- Grow tax deferred
- NEVER taxed when used for qualified medical expenses
- Roll over year after year -- no "use it or lose it"
- Portable, also goes with you
HSA Savings Can Also Be Use For:
- Health premiums when you're between jobs
- Qualified long-term care premiums
- Health premiums after age 65 (but NOT Medicare supplements)
- Living expenses -- after age 65 -- pay ordinary income taxes
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Is an HSA plan the right choice for me?
5 QUESTIONS CONSUMERS SHOULD ASK THEMSELVES
1. Do I want to save money for current and future health expenses?
HSA plans have two primary components – health insurance coverage and an actual tax-advantaged savings account. You can use the money in the savings account to pay for your current health expenses, but you also own the money in the account regardless of whether your health coverage changes or you move to another city. So, HSAs offer an opportunity to build tax-advantaged savings for current and future health expenses.
2. Which type of health plan gives me a better financial value?
Do you prefer to save money on your monthly premiums in exchange for paying some of the initial costs of your health care services out of your own pocket (known as the “deductible”)? Or would you rather pay higher monthly premiums in exchange for your insurer covering a portion of your costs from day one? With HSA plans you can put the money you save on your premiums into your tax-advantaged savings account to build interest, whereas with a traditional plan, more money is spent on premiums regardless of how much health care you actually use.
3. Have I considered all the relevant costs for each plan?
To make sure you’re not comparing apples to oranges, you should consider all of the cost elements associated with each plan option. Traditional plans may include: higher monthly premiums, a smaller deductible, as well as copays and/or coinsurance. HSA plans may include: lower monthly premiums and a higher deductible. So depending on your health needs, a high-deductible plan may very well cost less overall than repeatedly paying a traditional plan’s copays and coinsurance
4. Will I lose unused money in the HSA?HSAs don’t have a “use it or lose it” provision. Just as some cell phone providers now let you roll over unused minutes, HSAs let you roll over your unused dollars from one year to the next, so you don’t have to worry about ever forfeiting your money.
5. Is it difficult to connect the HSA plan with the bank account?
Since you need to select a financial institution to open your savings account with, if the health insurer offering the HSA plan also has a financial institution available, it can make the process of setting up and using an HSA much easier and more convenient. Some insurers have their own bank and offer a single enrollment process so you can sign up for both the health insurance plan and the bank account at the same time, eliminating the need to go through two separate enrollment processes. Also, one way to turn HSA funds into long-term health care savings is to invest that money in mutual funds or other opportunities. So make sure that the bank you choose has investment options available.
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