Health Savings Account

What is a Health Savings Account?

A health savings account is a tax-exempt savings account available to you when you are covered by a qualified high deductible health plan. They were created to help give control back to consumers and lower healthcare costs. HSAs provide a financial incentive for consumers to select a High Deductible Health Plan (HDHP).  HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. Your contributions, potential interest gains and distributions used for qualified medical expenses are all tax free.


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Who is eligible to have a health savings account?

             Any adult can contribute to a health savings account if he/she:

What makes a health plan a qualified high deductible health plan (HDHP)?

A high deductible health plan (HDHP) is health insurance that satisfies certain government requirements. For 2012, a high deductible health plan for an individual must have a deductible of $1,200 or greater and a maximum out of pocket limit of $6,050.  For a family, a high deductible health plan has an annual deductible of at least $2,400 and maximum out of pocket limit of $12,100. The deductible and out of pocket amounts change annually to account for inflation. HDHPs generally have lower monthly premiums than traditional plans.

What is a qualified or eligible medical expense?

Qualified or eligible medical expenses are defined as those expenses paid for care as described in Section 213(d) of the Internal Revenue Code. Additionally, the IRS allows some over the counter medications to qualify as eligible medical expenses. A complete list of qualified medical expenses is available at www.irs.gov.

What happens if I don’t use the money in the HSA for medical expenses?

If you are under 65 and use your money for NON-ELIGIBLE medical expenses, you will be subject to income tax and a 10% penalty tax.

Will I still have a copay for my office visits and prescriptions?

Except for preventive care, the coverage may not provide benefits until the annual deductible for the year is met. Charges for doctor’s visits and prescriptions will apply toward the annual deductible until it is met. Some plans do cover preventive care at 100% even before the deductible is met.

Who can contribute to a health savings account?

Deposits to your health savings account can be made by anyone including yourself, your employer, or both.

How much can I contribute each year to a health savings account?

For the 2012 tax year, the maximum contribution is set to the statutory maximum of $3,100 for single coverage and $6,250 for family coverage. You can contribute in a lump sum or in any amounts or frequency you wish. In addition to the maximum contribution amount, catch-up contributions may be made by or on behalf of individuals age 55 and younger than 65. In 2012, the catch up contribution is $1,000.

Where can I set up a health savings account?

 Many local financial institutions offer health savings accounts. Check where you bank. You may also use companies such as HSABank. (www.hsabank.com)

Can I use my HSA to pay for medical expenses incurred before I set up my account?

No. You cannot reimburse qualified medical expenses incurred before your account is established. We recommend you establish your account as soon as you become covered under a high deductible health plan.

How do I access my health savings account funds?

Your health savings account administrator will offer you a debit card and/or checkbook for you to use to pay for your medical expenses.

Can I use funds in my health savings account to pay for medical expenses incurred by my dependents?

Yes, you can use money in the account to pay for medial expenses for yourself, your spouse or your dependent children. You can pay for expenses for your spouse and dependent children even if they are not covered by your high deductible health plan.

Can I have both a health savings account (HSA) and a flexible spending account (FSA)?

If you contribute or have funds contributed on your behalf to a health savings account, you can only participate in specific types of FSAs. You may have a limited purpose FSA that only reimburses benefits such as vision, dental, or preventive care or a FSA that only reimburses expenses after the minimum annual deductible has been satisfied. In addition, if your spouse participates in flexible spending account, you cannot establish a health savings account.

If I don’t use all the funds in my health savings account during any given year, do I lose those monies?

No. Once money is contributed to a HSA, it belongs to the participant and can’t be forfeited. The funds can roll over from year to year. There is no “use it or lose it” clause like in FSAs (flexible spending accounts).

What happens to my health savings account if I leave my current employer?

Your account is portable.You keep the account and the funds in it even if you change insurance plans, jobs, or retire.

What happens if my employer stops offering a high deductible health plan or I change jobs and my new employer does not offer?

You can still use the funds in your health savings account to reimburse qualified medical expenses without penalty. There is no time limit on using the funds. You could not make new contributions to the account.

What happens to the money in a health savings account after you turn age 65?

You can continue to use your account tax-free for out of pocket health expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance policy. Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties.

Can I borrow against the money is my HSA?

No. You may not borrow against it or pledge the funds in it. For more information on prohibited activities, see Section 4975 of the Internal Revenue Code.

What happens to the money in my HSA when I die?

If married, your spouse becomes the owner of the HSA when you die. If unmarried, the HSA becomes part of your taxable estate.

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