Health Savings Accounts were the biggest change on the health insurance scene in decades. First enacted into law in 1996, they offer welcome relief from the high cost of health insurance and give more control to the consumer as to what their health care will cost them. The tax benefits are lifelong.
Many consumers as well as insurance agents have run away from them based on an unfounded fear that they are difficult to understand. The fact is health savings accounts are actually much simpler than traditional health insurance. They are just different.
If you are looking for a way to simplify the chaos in your health insurance and put more money into savings then the new health insurance savings account is just the ticket. Set aside everything you’ve heard or seen and start with a blank slate.
This plan has only two parts – the qualified insurance plan and the savings account. Like traditional insurance you have a deductible to meet and the plan pays the balance of your bills. The savings account portion allows you to save money tax free to meet that expense.
A single person can take out an insurance plan with a high deductible that pays 100% of bills once the deductible is reached. There can be no co-pays on a qualified HSA plan. Because the plan is HSA qualified that person can open a health care savings account. They can deposit funds into it tax free. As long as the funds used from that account are for qualified health expenses they can draw on those funds for doctor visits, prescriptions, dental work and a host of other expenses. Funds used in this way remain tax free.
The best news is that any funds not used remain in the health savings account and grow tax free year after year. Every year a person or family can invest up to the limit allowed for that year and it will grow inside the account much like an IRA. It is your money, in your special savings account. The money even remains as part of your estate if you die.
In 2016 singles can deposit up to $3,350 and families can deposit up to $6,750.
Over 55? You can add an additional $1,000 a year to your savings account tax-free as part of the “catch-up” provisions.
The concept is simple but there are many ways to complicate it. There is no one size fits all. Give us a call to determine how an HSA can work for you.