Health Savings Accounts and Qualified High Deductible Health Plans
Please note beginning 1/1/2011, Over The Counter Medications may not be paid for from your HSA account.
I strongly believe that Health Savings Accounts (HSAs) are a tremendous value for many of my clients. These accounts, sometimes referred to as Medical IRAs, are used in conjunction with High Deductible Health Plans. Consumers who choose high deductible plans do not have to open an HSA, but it makes sense to do so even if one cannot afford to fund it initially.
The money you put into your HSA is a line item deduction on your taxes. You can use these untaxed funds to pay for your qualifying medical expenses such as your deductible without the money being taxed on the way out. Unlike a Flexible Spending Account, which forces consumers to predict medical expenses at the beginning of the year and does not permit funds to roll over, Health Savings Account funds belong to you. If you don't spend the money in your account, it rolls over. Each year you can make additional investments into your HSA, not only saving money on taxes and saving to cover your deductible, but also saving for your eventual retirement.
High deductible health Plans have generally lower premiums than copay driven plans because the insurance carrier is not paying for your medical expenses until you reach your high deductible (between $1,500 and $5,950 for a single person and $3,000 to $11,900 for a family.) While doctor's office visits and prescriptions are not paid for by the insurance company until the deductible is reached under these plans, the costs are discounted if you see a network provider, and you can achieve additional savings by paying for these expenses from your HSA account. Many high deductible plans pay for annual physicals on a first dollar basis, and, in Colorado, there is never a deductible for child wellness for children under 13, meaning that your kid's physicals and immunizations are paid for at 100% by the insurance company.
To decide if this type of coverage makes sense for you, ask yourself:
How often do I (we) visit the doctor other than wellness?
Are the prescription medication I (we) take expensive?
Is it worth it for me to prepay for copays?
Can I use another tax deduction?
Can I benefit from another retirement savings vehicle?
I recommend and quote comprehensive high deductible plans from reputable insurers. If your family hits that high deductible, your covered expenses are paid for by the insurer for the remainder of the calendar year.
For more detailed information about High Deductible plans and Health Savings Accounts please download and view this Powerpoint presentation.
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Joel Rosenblum is the owner of Insurance for Asset Protection. IAP provides health insurance plans, including individual, group, and medical supplements, and life insurance plans in Colorado.
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