Who is eligible to open an HSA?
Health Savings account eligibility is based upon the eligibilty of the accompanying health plan. You’ll have to contact your broker or HSA administrator to determine the eligibilty of your plan.
Lots of acronyms get tossed around in the health care world. One that comes up constantly in conjunction with HSA (Health Savings Account) is HDHP, or, High Deductible Health Plan.
An HDHP is the insurance policy that you must carry in order to be eligible for an HSA. It usually has deductibles around the $2000 range, and provides you coverage in case of catastrophic illness or accident. Generally, these plans are much lower in cost than traditional health care plans.
See Also: Health Savings Account FAQ’s
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If you are under 65 and withdraw funds from your HSA for a non-qualified expenses you must pay income tax and a 10% penalty tax on those funds. If you are 65 or older, you can spend out of your HSA for non-medical and non-qualified expenses, and are not penalized the 10%, but you must pay income taxes on the amount you withdraw.
See also: Health Savings Account FAQ’s
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Can you purchase a Pharmacy Discount Card and still be eligible for an HSA?
The answer to this is yes, however, you cannot pay for the card with your HSA funds, since it is not a qualified medical expense.
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The HSA Savings come from the money you save on health insurance premiums. In 2003, the average family spent around $9000 on health premiums.
Remember HSA’s are two parts: an insurance policy and a tax-free account. So, if you take $3,000.00 of that $9,000.00 (leaving $6,000.00 unspent) and you or your employer purchase a health insurance policy that covers your medical expenses above $5,150.00, the high deductible health insurance plan is in place.
Now, according to the law, you are allowed to deposit – tax free – up to $5,150.00 to pay for the routine medical care. Withdrawals for medical care are tax-free. Your insurance company may administer the account or you can open the account with an HSA administrator or a bank that offers Health Savings Accounts. To review, out of the $9,000.00, you spent $3,000.00 on a health insurance policy with a $5,150.00 deductible. The insurance covers your family’s health care costs that exceed the $5,150.00 deductible. Out of the $6,068.00 remaining, you and your employer deposit $5,150.00 into your health savings account. It is now your money. If you leave your employer, it is still your money. It follows you. What you do not spend out of the account rolls over, so if you and your family only have health costs of $2,000.00 this year, you and your family would have $3,150.00 remaining in your Health Savings Account. So, next year, you will start your Health Savings Account with $3,150.00, plus the interest you earned, and you and your employer will add another $5,150.00 to your account, giving you ($5,150.00 + $3,150.00 = $8,300.00) to spend next year. So, you and your employer just saved $918.00 in health care costs in the example above.
Over time - you will see dramatic savings with this plan - up to thousands of dollars a year after a few years.
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If you’re not lucky enough to work for an employer who is offering health savings accounts as an option to traditional health care coverage, or you’re self employed, or unemployed, you can use the combination of a high deductible health plan and a health savings account to provide for your own medical coverage.
The process is actually quite simple - you can shop around numerous insurance carriers, as many of them offer a qualifying health plan in conjunction with a health savings account. Your other option would be to determine a carrier for your HDHP, and then locate an HSA administrator to create the account for you.
You can find HSA Specialists like First Horizon MSaver to tell you more, and help you get started.
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See also:
What is an HSA?
Health Savings Account Eligibility.
Here is a short list of the most common medical expenses that qualify for use with a health savings account:
HSAs can be used to pay for many types of medical expenses, even some that are often excluded on health insurance plans. These include:
* Health insurance plan deductibles, copayments, and coinsurance
* Prescription and over-the-counter drugs
* Dental services, including braces, bridges, and crowns
* Vision care, including glasses and lasik eye surgery
* Psychiatric and certain psychological treatments
* Long-term care services
* Medically-related transportation and lodging
Typically HSAs cannot be used to pay health insurance premiums, although there are exceptions for:
* Health insurance premiums if you are receiving federal or state unemployment benefits
*Premiums for COBRA qualified health insurance
*Certain qualified long-term care insurance premiums
*Premiums for a health plan (other than a Medicare supplemental policy) for an individual age 65 or older
Note: You must establish an HSA before incurring any expenses or the expenses will not qualify.
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A very common question is “Can I use my HSA for non-medical expenses?” The answer to this has a few different parts.
Part One - yes, an HSA is your money, and unlike high insurance premiums you will never see again, you can do whatever you see fit with that money.
Part Two - However, if you’re under the age of 65 and use your HSA for any non-medical expense, it’s subject to income tax fees, and a 10% penalty.
Part Three - If you’re over 65, you can spend that money just like any other retirement account. Go ahead, you earned it.
See also:
What Can I do with the Balance
What expenses are HSA eligible
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Basically, you can spend your money, tax free, from your HSA on all medical, dental (including orthodontics), vision, and chiropractors. Here is a link to the IRS list of all eligible expenses:
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Any age is eligible - but the group that will see the most benefits is young and healthy. However, while those over 60 may not see as much cost savings, it is possible they will see an improvement in care by moving from a managed healthcare plan to a privately controlled scenario.
In order to qualify for an HSA, you must first qualify for a high deductible health plan.
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