A Health Savings Account is a great tool to help you pay for healthcare expenses.
A Health Savings Account (HSA) is a type of savings account that lets you put aside money on a pre-tax basis for qualified medical expenses.
A HSA may also earn interest which is also tax free.
These are just a few examples of definitions of what a Health Savings Account is. Questions about Health Savings Account come up very often so I thought it would be helpful to go over the commonly asked questions with you:
What is the advantage of having a Health Savings Account?
- A Health Savings account is very much like a savings account except you can only use it on qualified expenses. To be eligible, you must be enrolled into a high deductible plan that is HSA eligible. Insurance companies must tell you if your plan is HSA eligible.
- The money that you put into the account is typically made pre-tax especially if you get the plan through your employer. If you get your healthcare plan outside of an employer, you can simply make contributions to the HSA and then deduct them from your gross income when you do your taxes.
- Withdrawals from your HSA are also not taxed if you use the money for qualified medical expenses.
- Your employer may also contribute money to your health savings account.
- The money that you put into your account yourself rolls over year after year.
What are the disadvantages of having a Health Savings Account?
- Some people are reluctant to seek healthcare because they don’t want to spend the money that is in their HSA.
- If you were to withdrawal money from the account and it wasn’t for a qualified expense, you will owe taxes on the money as well as a penalty of 20%.
- You must keep good records to be able to prove that the money you took from the account was a qualified expense.
- If you are Medicare eligible, you do not qualify for a Health Savings Account. In fact, if you contribute to a HSA and are Medicare eligible, you will have to pay back the taxes along with a penalty.
What is a qualified medical expense?
Healthcare expenses such as co-pays, deductibles, eye doctor appointments, eyewear, contacts, dental visits, medications, are just to name a few. If you ever have a question about what is a qualified expense, please reach out to us or your tax advisor.
What expenses are not qualified?
Non prescription medications, nutritional supplements, cosmetic surgery, health club dues, medications from other countries, and teeth whitening are just a few examples of expenses that would not be a covered expense.
How much money can I put into a Health Savings Account each year?
You can contribute up to $3,500 each year for single coverage or up to $7,000 a year for a family. If you are 55 or older anytime in 2019, you can contribute an additional $1,000 a year. Always remember that the money you put into the account is not taxed so it could potentially save you money on your taxes at the end of the year.
Questions will continue to come up no matter what type of Health Insurance plan you have. At Balanced Care, your questions are always welcomed and expected. Whether you decide to take a plan that is Health Savings Account eligible depends on your own comfort level and budget.
We just want to make sure you know all your options, the rules around each option, and allow you to make a decision that is best for you.
Terri Trepanier is the owner of Balanced Care Health and Supplemental Insurance and a licensed insurance consultant and broker with Associated Brokers. Licensed in both Maine and NH, her specialty is working with small businesses, individuals, and families with their health and life insurance needs. She is certified to offer health plans both on and off the exchange and is contracted with every health insurance company that offers plans in both New Hampshire and Maine. Her other passion is assisting Medicare beneficiaries with their Medicare Supplemental, Medicare Part D Prescription Drug Plans, and Medicare Advantage plans. Terri has seen firsthand the importance of insurance products and how they help families. Her goal with Balanced Care is to “Insure Security and Peace of Mind One Family at a Time”.