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Health Savings Account

Are you concerned about the rapid increase in the cost of health care? How can a Health Savings Account help you control costs and afford good health care protection? Contact us to learn how...

Whether you are looking for a stable group Insurance plan to cover your employees or you need to know about personal choices for you and your family here are some basics you should know about Health Savings Accounts.

In 1997 Medical Savings Account (MSA) came out of 1996 legislation called the Health Insurance Portability and Accountability Act (HIPAA). The idea was that individuals and small employers could have a major medical health insurance policy with a large deductible, which would help keep monthly premiums down. It was partnered with the MSA, a savings account set up with tax-free money to cover the deductible, should medical expenses arise. The unused funds in the account would roll over year after year, earning tax-free interest.

MSA’s were available only to individuals and small employers until Congress amended it again with the Medicare Modernization Act of 2003. The name was changed to Health Savings Account (HSA), and enrollment was open to everyone under age 65.

Key Features of Health Savings Accounts

• Qualified High Deductible Health Plan (up to $5,100 for individuals or $10,500 for families) keeps the premiums about 30% to 50% lower than traditional health insurance plans.
• You must be covered by a Qualified High Deductible Health Plan (QHDHP) to be eligible to make deposits into an HSA account. In 2006, an HDHP has a minimum annual deductible of $1100 for Single coverage and $2200 for Family coverage.
• Funds set aside in the HSA are completely tax deductible, and the interest is earned tax free.
• Both employees and employers may make deposits to a HSA account. Maximum annual deposits may not exceed the lesser of amount of the deductible or $2700 for individuals and $5450 for families in 2006. This maximum is prorated from the first full month of coverage under a QHDHP so, for example, if you started the plan on July 1st you would only be able to deposit 50% of what would otherwise be your maximum.
• Unused funds accumulate year after year, and there is no set time when they have to be withdrawn
• The HSA is portable. If employees leave a job, the HSA goes with them.
• Distributions from the HSA to pay for qualified medical expenses are tax free for life.
• Qualified expenses for services that are not covered under the health plan, such as dental or optical can be paid from the HSA.
• There are some restrictions to keep in mind with the HSA. Once money is deposited into the account, it can only be withdrawn for medical expenses. Withdrawals for other reasons are subject to penalties. This restriction is lifted at age 65.
• The idea of the HSA is becoming popular with small and large employers alike. According to the June 2005 issue of "Best's Review", the number of persons covered under HSA policies doubled from September 2004 to March 2005. 

For additional Information:
www.hsainsider.com 
www.ehealthinsurance.com 
www.treas.gov/offices/public-affairs/hsa

Of course, you can always email us or call our office. We love your phone calls! Either way we will be glad to answer your questions.