If your employer offers health benefits, there is a chance they offer a Health Savings Account compatible plan. You may be familiar with those type of plans, or it may sound like a different language. Don’t fret if you don’t understand. That’s where we come in. Below is a basic breakdown of an HSA.
What is a Health Savings Account?
Also known as a HSA, a Health Savings Account is a savings account that you can use to pay for medial related expenses. It can be funded by tax-exempt dollars by your employer, by yourself or by anyone else on your behalf. The funds in the HSA account can help pay for eligible medical expenses not covered by an insurance plan. This can include copays, deductible, coinsurance and prescriptions.
Who is eligible for a Health Savings Account?
In order to open and contribute to a HSA plan there are a few stipulations. You are eligible if you are:
• Covered by a high deductible health plan (HDHP)
• Not covered under another medical plan that is not an HDHP
• Not entitled to (eligible for AND enrolled in) Medicare benefits
• Not eligible to be claimed on another person’s tax return
What is a HDHP?
A high deductible health plan is a plan with a minimum annual deductible and a maximum out-of-pocket limit that is set by the IRS. These limits change annually but for 2021 the limits are as follows:
Type of Coverage Minimum Annual Deductible Maximum Annual Out-of-pocket
Individual $1,500 for 2023 $7,500 for 2023
Family $3,000 for 2023 $15,000 for 2023
So how does it work?
Your high deductible health plan does not provide co-pays when you visit a Dr or pharmacy. That leaves you to pay the total expense of the visit or the prescription. Your claims will still be ran through your insurance company and most will be re-priced at the negotiated price from your insurance company. You can then use the funds in your HSA account to pay for those expenses. Most HSA accounts will offer checks or debit cards to make paying bills easy. The important thing is to make sure you are using those funds for qualified medical expenses. If you use the money for non medical expenses you will be subject to additional taxes and penalties.
Click here to learn how your HSA works with Retirement.
You can make a contribution to your HSA each year that you are eligible. You can contribute no more than:
• Single coverage: $3,850 for 2023
• Family coverage: $7,750 for 2023
Individuals ages 55 and older can also make additional “catch-up” contributions of up to $1,000 annually.
A few more things.
Unlike other accounts, a HSA is not one that you have to use or loose by the end of the year. You can contribute money into this account and not touch it for years. It will just stay in the account until you need it. The IRS also puts yearly caps on how much you can contribute each year into your HSA. You can click here to learn more.
If you have additional questions, we are are happy to help!