How an HSA Insurance Plan Works With a Health Savings Account

HEALTHCARE REFORM UPDATE: Due to reform mandates, all NEW HSA-qualified health insurance plans now include important new benefits, including:

  • Unlimited Lifetime Maximums
  • Extensive preventative care benefits at NO out-of-pocket cost to you!

If you're serious about regaining control of your healthcare dollars, this is a great time to consider replacing your high cost health plan with a cost-effecitve health savings account plan. Or, if you have an existing HSA plan, this is a great time to consider switching to a new, reform-compliant plan.

Questions? Need help identifying the best plans? Call me direct: 702-425-5250. I've been a licensed benefits broker since 1980. If I can't help you, nobody can.

An HSA Insurance Plan can be summed up in 3 easy steps:



Buy a low cost, high deductible plan. Take out a high deductible HSA insurance plan that works in conjunction with a health savings account. Your monthly premiums will be much lower due to the higher deductible. NOTE: The policy must meet specific IRS guidelines (see HSA Guidelines link). Our agency is independent - we work for you. Just click on the orange "GO" button on the right to get free quotes from major, A-rated insurers. Visit our home page for more info



Open an HSA savings account. Once your HSA insurance plan is in force, you can open the actual savings account at any qualified financial institution. An HSA is similar to an IRA. Deposits are tax deductible and withdrawals can be made on a tax-free basis to pay for medical expenses. Annual limits are imposed on the amount contributed. See section below entitled "Etcetera" and links to the right for additional details. Visit our home page for more info


Supplemental retirement funds. In general, you should be able to fund the account primarily with "extra dollars" you otherwise would be using to pay for a higher cost health plan (with a lower deductible, co-pays, etc.). In addition, a typical family will save about $1,600 a year in taxes by contributiing to their health savings account. Funds left over at year's end "rollover" from year to year and accumulate toward retirement on a tax-favored basis - just like an IRA.

 

 

HSA Benefits at a Glance:

  Impressive tax-savings - regardless of whether you itemize. When you file your taxes each year, all of the money you have deposited into your health savings account will be tax-deductible on line 25, front page, of your 1040 form (assuming you have qualifying income at least equal to your contribution amount). This will cut your tax bill by an average of $2,000 for a family (and about $1,000 for a single), based on a 33% tax bracket. Because of the tax savings, it absolutely is correct to say that with an HSA insurance plan, you are paying routine medical bills with money you otherwise would have paid in taxes! How cool is that? (see examples below—you also save money on the actual bill in most cases)

 
Double-discounts. When you visit a physician, you pay with tax-free money from your health savings account--money you otherwise would have paid in taxes or premiums, for the most part.  The account is easily accessible by debit card or check.  If your provider is a member of the PPO discount network you have joined (through your HSA insurance plan), your bill will actually be reduced before you have to pay it.  (example: $120 Dr. visit reduced to $85.  You pay the discounted $85 with tax-free, i.e. discounted dollars from your HSA.)

  Rx savings. When you purchase prescriptions, simply visit a participating PPO discount pharmacy (most all major chains participate) and pay your discounted amount on the spot, either by debit card or check directly from your health savings account (again, with tax-free money). For greater savings, use the bulk priced Rx mail service. Some plans offer the option to exclude Rx drugs from coverage for even greater premium savings.

  Tax-free money for dental, eyewear, etc. Most medical expenses not covered by the underlying HSA insurance policy may still be considered allowable expenses under the health savings account.  For example, dental work, including braces, vision care, including glasses, eye surgery, alternative therapies such as acupuncture, etc. can all be paid for with tax-free money from the HSA.  Click here for the approved list of IRS-qualified expenses.

 

The Super-IRA effect. What you don't use from the health savings account each year is yours to keep. The balance continues to grow and grow on a tax-sheltered, compound basis. Once you reach age 65, the account can basically be used just like a traditional IRA.

Tip: Keep funding the HSA every year to the maximum amount allowable by year (this amount increases each year, by law). Use "after-tax" dollars to pay routine medical bills. This reduces your taxes each year and allows you to grow your account substantially larger, giving you a larger cushion against unexpected “catastrophic” type claims in the future, and a larger "pot of gold" for retirement.  (Note: If you do opt to dip into your HSA to pay routine medical bills with tax-free dollars, realize that dipping into your HSA savings account is not the same as dipping into your pockets—your HSA is the functional equivalent of “insurance” coverage for the small bills—what you don’t have to use is yours to keep. This is in stark contrast to paying an insurance company a few thousand dollars a year to do virtually the same thing--insure the “small” bills)

  For even more BENEFITS of a health savings account plan, click here: More HSA benefits 
   

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Client Comments

"We were skeptical at first but discovered that the tax-savings alone covers our minimal out of pocket costs each year."
R.T., Joliet, IL.

"An HSA insurance plan is ideal for our situation, with its low cost and high degree of flexibility.
T.M., Jacksonville, FL

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