Heart of Texas Insurance

What is an HSA?
A Health Savings Account (HSA) is a tax-favored savings account created for the purpose of paying medical expenses.  It's similar to an IRA.  Contributions to the HSA are 100% deductible (up to the legal limit) and qualified medical expenses are never taxed.  Unlike Flexible Spending Accounts, unused money in your HSA isn’t forfeited at the end of the year, but it continues to grow, tax-deferred.

Like an IRA, any money that you withdraw that's not for qualified medical expenses are taxed at your income level, plus a 10% penalty.

What is a High Deductible Insurance Plan (HDHP)?

It's an insurance plan with a minimum deductible of $1100 for a single person or $2200 for a family.

How does an HSA work?

Use the money you've accumulated in your Health Savings Account for doctor visits, medications, and diagnostics, up to your deductible.  With plans that have no coinsurance, the insurer pay 100% above the deductible.

What is coinsurance?

This is the amount you are obligated to pay above the deductible.  It is usually a percentage, up to a given ceiling.  You always know what your total out of pocket expenses will be and you might elect to have coinsurance in order to have a smaller premium.

Are HSAs appropriate for familes?

I hate to recommend an HSA for families with small children, because we don't know if the child will develop medical problems that require frequent visits to the doctor.  However, many HSAs have "well child" care, as well as Adult Preventive Care, making HSAs an affordable option.

What are qualified medical expenses?

A qualified medical expense is defined by Internal Revenue Code Section 213(d) to cover expenses for "medical care".  The expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness, but it includes dental, vision, and long term care premiums.  For the complete list of medical expenses, see IRS Publication 502.

What are the tax benefits?
There are three major tax advantages to your HSA.

1. Cash contributions to an HSA are 100% deductible from your federal gross income.
2. Interest earnings accumulate tax-deferred.
3. Withdrawals from an HSA for “qualified medical expenses” are free from federal income tax.

Can I have an HSA and an IRA?
Yes, having an HSA in no way restricts your ability to have an IRA.

Can those over 55  “catch up” on contributions?
Individuals aged 55 and over may contribute an additional $900 above the maximum beginning in 2008.

Can I pick any doctor or hospital?

Yes.  The insurers have negotiated rates with thier network to give discounts on health care, even prior to meeting the health insurance deductible.  So, if you go to an in-network doctor or hospital, you save more.  However, you can pick any doctor or hospital you want.

Is there an advantage over hospitalization-only plans?

Yes.  A hopitalization-only plan will not cover physician services or diagnostics, which can make up as much as 50% of the hospital bill.

One of the primary Health Savings Account Advantages is the lower premium.  The difference in premiums, between plans with copayments for doctor visits and plans without copayments, runs hundreds of dollars per year.  That difference can usually pay for normal check-ups many times over.

Health Savings Accounts are tax deductible off gross income.  The money in the account grows tax-deferred.  The money spent from the account on qualified medical expenses are not taxed.  Thus, we say that HSAs offer triple tax advantages.

If you want to know where you can find a health savings account providers, start here.