Health Savings Account (HSA ) can be a good tool for affordable health insurance in West Los Angeles, but it is important to learn more on how HSA account work.

What is a Health Savings Account ( HSA)?
Think of HSAs as “medical” IRAs. They are tax advantaged accounts that individuals with an HSA compatible highdeductible health plan (HDHP) can fund and use to pay for medical expenses. Because they are tax advantaged andbalances can accumulate over time, HSAs can also be used to accumulate wealth. In addition, HSAs are owned by theindividual account holder and are therefore portable. Since inception in January 2004, HSAs are quickly gaining in
popularity among individuals and employers alike.

What are the requirements for having an HSA?
1. You must be enrolled in a high deductible HSA qualified health plan with any carrier
2. You cannot be claimed as a dependent on another persons’ tax return
3. You cannot be enrolled in Medicare
4. You cannot have dual health insurance coverage (be covered by another non HSA qualified health plan.)

How much can be contributed to an HSA?
The 2011 IRS contribution limits are the same as the IRS contribution limits for 2010: $3,050 for single plan coverage and $6,150 for family plan coverage.

2011 IRS Limits
Single Plan            Family Plan
Minimum Deductible                  $1,200            $2,400
Maximum Out-of-pocket            $5,950            $11,900
Maximum Contribution Limit   $3,050             $6,150
Catch-up Contribution (55+)     $1,000            $1,000

How do I fund the HSA?
You fund the HSA using federally tax free dollars.  If your employer allows, you can elect to have pre-tax contributions made via payroll deduction.  You can also transfer funds online or send an “after tax” check and take the deduction as an above the line deduction on your federal income tax return 1040 when you file your taxes.  Another option is to roll money over from an existing IRA.

How can the funds be used?
The funds can be used for qualified health care expenses, including medical, dental and vision. Please see  section 213 (d) for a full listing of qualified expenses. HSA funds can also be used to pay for COBRApremiums, Long Term Care premiums and Medicare premiums (Part B,C and D). All funds can be spent on eligible expenses for any IRS dependent, regardless of whether or not they are covered on the health plan. If funds are used for non-qualified expenses, a 20% IRS penalty applies.

What happens when I turn 65?
You can continue to use funds in an HSA for qualified medical expenses tax free, but another benefit for account holders 65 and over is that the HSA funds can also be spent on non-qualified expenses without a 10% penalty. Distributions for non-qualified expenses are taxed as “ordinary income”.

Do I lose the funds if they are not spent at the end of each year?
No. Unlike other health care accounts like FSA’s, there is no “use it or lose it” provision with HSA’s. The funds in an HSA roll-over from year to year, are interest bearing, and are even portable if the account holder changes jobs or health insurance carriers. HSA’s are often viewed as additional retirement savings accounts for these reasons.

How do I pay for things?
Depending on the financial institution  HSA account holder, can use a HSA debit card or checking book which they can use to purchase items that are qualified expenses. For example, at an in-network doctor’s office you will wait to be billed and then place your debit card numbers in the card options spot on the bill when you receive it. At the pharmacy, for dental,
vision and out-of network doctors, you will also have the option of using your debit card at the time of service.

Do I have investment options for balances in my HSA?
Yes, you have full reign to self-direct the funds in your HSA account. However, it is recommended that you leave your deductible or better yet the out-of-pocket maximum amount liquid in your HSA managed account in case of a medical emergency.

Why would I choose an HSA?
HSAs are beneficial in many ways. Not only do account holders save money on health insurance premiums, but they are better able to take control over their health care choices and expenses. HSAs are the innovative financier of health care today and retirement tomorrow. Why spend more than you need to on premiums and taxes when you could be saving the money for yourself on a rich benefit PPO plan?

In most recent years the HSA premiums have sharply risen and it is very important to evaluate for each client if the HSA or your traditional PPO is the best option for you to find affordable health insurance in West Los Angeles.