Megapolis Insurance

Health Savings Accounts are attractive because contributions to these accounts are tax deductible on federal income tax returns. The choice of making Health Savings Account (HSA) deposits deductible on state tax forms is left up to each state. Almost all states have chosen to follow the federal example on this and Wisconsin is the latest state to adopt that legislation beginning with the 2011 tax year.

Individual coverage health plans that can be combined with an HSA have a deductible of at least $1,200. Family HSA plans have deductibles starting at $2,400. These high-deductible plans usually cost much less than co-pay plans, which don’t require policyholders to meet a deductible.

Once Health Savings Accounts are funded, they can be used to cover the deductible. Since HSA contributions are tax deductible, both the premium and tax savings can be channeled into the HSA.

Forty-seven states allow residents to take a state tax deduction for a Health Savings Account.

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Proponents say that only Health Savings Accounts separate health care from insurance. For example, say you have family coverage through work that costs the employer $12,000 annually. If your employer pays for all the premiums and you have $25 co-pays to see a doctor, your expense is limited.

In contrast, if your employer still spends $12,000 a year, but puts $5,000 of it into a Health Savings Account (HSA) in your name, $5,000 of your health care benefit is now legally yours. Instead of a co-pay plan, your employer must buy a High-deductible Health Plan that’s qualified to work with an HSA.

Preventive care is 100-percent covered, but you’ll have to pay for other services until the deductible has been met. Any Health Savings Account funds you don’t spend on health care are yours to keep. That’s distinctly different from Flexible Spending Accounts, which are “use it or lose it” at the end of the year.

Each year, your employer contributes $5,000 to your HSA. As long as your health remains good, the balance in the HSA account can grow with tax-free earnings. It’s yours to keep if you change employers or retire.

With Health Savings Accounts, people can become more proactive when it comes to making their own health care choices. An HSA plan allows you to contribute money to a savings account that earns tax-free interest. Then, you can tap that money for future medical expenses and the withdrawals are also tax-free as long as you buy a type of health care that is qualified to work with an HSA. That list is pretty long and includes many services that traditional health insurance doesn’t cover, like dental care.

Before you can start an HSA, you must have a high-deductible health plan and not just any plan will do. Be sure to get a plan that is qualified to be combined with an HSA. These two always go hand-in-hand. As of 2011, high-deductible plans must have a minimum deductible of $1,200 for individual coverage or $2,400 for family coverage to be used in combination with an HSA. The maximum yearly HSA contribution allowed is up to $3,050 for an individual HSA plan and $6,150 for a family HSA plan for both 2010 and 2011. If you are 55 or older, you can deposit an additional $1,000 every year in what are known as “catch up” contributions.

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With the advent of Health Savings Accounts, high-deductible health plans became more attractive to employees. Even if they have to pay for high out-of-the-pocket expenses for medical bills before the insurance coverage starts when they meet the deductible, there are advantages. Health Savings Accounts allow consumers to save in order to pay for future qualified medical costs with tax-free earnings and tax-free withdrawals.

Small employers are given two HSA plan options to offer employees. A small-group HSA-qualified plan may help with underwriting concerns for employees who have pre-existing health conditions. On the other hand, if each employee is underwritten individually by getting their own plan, they may be able to keep the insurance policy if they leave the company. Employers have the option to give fixed monthly contributions to the individual or family HSA accounts of their employees. The contributions are tax-deductible on the employer’s part and are not included in the gross income of employees. If the employee decides to leave, the contributions made by the employer stay with the employee.

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