With co-pay plans becoming a costly option to consumers, millions learned that having a high-deductible plan coupled with a Health Savings account can potentially save them thousands of dollars every year. This year, the America’s Health insurance Plans (AHIP) have witnessed an increase in HSA enrollment up to 14 percent.
With the passage of the Affordable Care Act, HSA plans offer more health care. You can get preventive care services from in-network providers with no out-of-pocket costs. This added benefit may be fueling the increase in demand for HSA plans, or it could be the premiums. High-deductible plans, in general, cost less than co-pay plans. Those are the ones that charge which you specific amount, usually $25 or $35, every time you fill a prescription or see a doctor before picking up the remainder of the bill.
Health care reform also changed a couple of HSA benefits that not everyone liked. You still cannot use HSA funds for over-the-counter medications unless your doctor prescribes them. In addition, the tax penalty for using HSA dollars for anything other than qualified health care was increased from 10 to 20 percent this year.
What Are the HSA Plan Tax Advantages?
The money you contribute to your HSA can be deducted from your annual taxable income. Your employer may also contribute for your requirements. For 2012, the most contribution limit is $3, 100 for individual plans and $6, two hundred and fifty for family plans. You can also make catch-up contributions of an extra $1, 000 once you reach fifty-five.
As with an IRA, HSA money can be invested in bonds, mutual funds or stocks and earnings are not taxable if you do not withdraw money to spend on something other than qualified health care. When you’re 65, there’s no penalty for using HSA money for what you may want. After you’re 65, you’re not necessary to start withdrawing funds as you are with IRAs. That means you can keep building your retirement account and still have access to the cash as it’s needed.
Did you know that the IRS allows individuals to have multiple Health Savings Accounts? You can set up an investment-oriented HSA to build a fund for retirement and a cash-based one, like an interest-bearing savings account, to keep the funds liquid and ready to pay for health care.
Are Health Savings Accounts Available From Banks?
Health Savings Accounts can be obtained by banks and private health insurance companies, and more financial organizations are added them with the increase in demand. While it may seem convenient to start an HSA with the same insurance company that offers the HSA-qualified high deductible policy, it may impede trying to switch your health insurance plan. Rates do increase and it’s most probably that you could find an insurance plan from a different insurer that would work with your existing HSA, but if both are via an insurance company, you’ll have to move both. Keeping you HSA and high-deductible health plan separate is probably less hassle when you want to change health insurance to get a lower rate.