Considering Health Savings Accounts

Since Health Savings Accounts (HSAs) wereout-of-pocket expenses cannot exceed $5,250
created by the Medicare bill signed into law infor an individual or $10,500 for a family. This
2003 they are being considered by more andincludes deductibles and co-payments, but not
more Texans as a health insurance option. Here ispremiums. So you can buy an individual
a quick overview on a complicated subject.high-deductible healthcare policy, or purchase one
What's a Health Savings Account (HSA)?through your employer.
They have two parts. The first part is a qualifiedTo qualify as an HSA-eligible policy in 2007, your
high-deductible health insurance policy that covershealth insurance plan must have a deductible of at
large medical bills. The second part of the Healthleast $1,100 for individual coverage or $2,200 for
Savings Account is an investment account orfamilies. You can then make a contribution to your
retirement account from which you can withdrawHSA up to the amount of the deductible each
money tax-free for medical care. If you don'tyear. If you're buying an individual plan, be sure to
withdraw the money for medical expenses, theask your health insurance company if it is an
money accumulates with tax-free interest until"HSA qualified" high deductible plan. Not all high
the age of 65, when you can withdraw it for anydeductible plans are eligible, or "qualified".
purpose and pay normal income taxes.Where can I get an HSA-Eligible Plan?
Who's eligible for an HSA?First you need a qualified high deductible plan.
Anyone under age 65 who buys a qualifiedFinding a plan depends on whether you get it
high-deductible health insurance policy can open anthrough your employer or purchase individual
HSA. If you're covered by another healthinsurance.
insurance policy that isn't a qualified high-deductibleEmployer Insurance -If you get health insurance
plan (either as an individual or a dependent), you'rethrough your employer, ask about the HSA-eligible
not eligible for an HSA. If, however, you areoption during the group policy's open-enrollment
eligible, you can still carry other accident, disability,period, which is generally in the fall. Or talk to your
dental, vision and long-term care insurance policies.benefits manager to see if HSAs will be on your
How much can I contribute annually to an HSA?health insurance menu. Choosing an HSA could
For 2007, you can contribute up to $2,850 forsignificantly reduce your share of premiums, and
individual coverage or $5,650 for families. If you'resome employers may opt to fund all or part of
55 and older, you can make a catch-upthe HSA, much like a 401(k)-style match.
contribution of $800. Legislation approved at theYour individual insurance company or employer will
end of last year allows you to contribute up tothen almost certainly direct you to their preferred
these limits, even if your insurance deductible isvendor for the administration of your HSA
less.account. Using the preferred vendor is usually to
Can any high-deductible health insurance policyyour advantage as data is more easily
qualify for an HSA?transferred between the insurance company and
Any high-deductible health insurance policy canthe HSA administrator and you get a break on
qualify, as long as it meets the IRS requirements.the administration fees. You are, however, free
The deductible must be at least $1,050 forto chose another HSA administrator if you prefer.
individuals or $2,100 for families, and the annual