In recent years, Health Savings Accounts have become increasingly popular. They can help offset the skyrocketing rise in health insurance premiums, and give the policyholder more control over their coverage, benefits, and premiums.
The basic concept of the HSA is that the policyholder assumes more responsibility for their healthcare charges, by having a qualified high deductible health insurance plan (HDHP). In exchange for assuming more responsibility with a higher deductible plan, the policyholder can fund a Health Savings Account on a tax advantaged basis. The money you contribute to your HSA is similar to an IRA contribution in that it is tax-deductible. The HSA funds can be used to pay for qualified medical expenses such as doctor’s expenses, dental care, contact lenses, etc., on a tax free basis.
You can maximize your tax savings by contributing up to the maximum annual amount allowed by the Internal Revenue Service (IRS). The current maximum amount allowed is $3,050 for single coverage and $6,150 for family coverage. If you are 55 or older, you can make an additional catch-up contribution. The maximum annual catch-up contribution is $1,000. Your HSA balance plus investment earnings carry over from year to year — tax-free.
Generally, HSA plans work well for individuals and families that do not have high annual healthcare expenditures. It usually does not make sense for those who have chronic health issues that result in high annual healthcare expenses. To see if an HSA plan makes sense for you and your family, you need to calculate the cost of your annual health insurance premium, and add your typical out of pocket healthcare expenditures.
If you would like a qualified insurance agent help you determine if an HSA plan makes sense for you, please contact us here at Hatter, Williams & Purdy, and we will be happy to assist you with your San Diego Health insurance plan.