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Health Savings Accounts 101

If you are an individual who is enrolled into a high deductible health plan (HDHP), starting a health savings account (HSA) may be a good idea. Funds that are deposited into the HSA are tax deductible and are used to pay for qualified medical expenses for the owner of the account or his family.

There are some important things to know about HSAs. There are limits to how much money can be deposited per year. The limits change each year to allow for inflation. For 2015, the limits are as follows:

Individual (Under 55) – $3350

Individual (Over 55) – $4350

Family (Under 55) – $6650

Family (Over 55) – $7650

*HSA account holders age 55 and older can save $1000 more per year

High Deductible Health Plans (HDHPs)

As mentioned, HSAs are only available for qualified HDHPs. For the HDHP to qualify, the deductible and maximum out of pocket must meet guidelines set by the federal government. Like the limits for HSAs, these guidelines change year to year. For 2015, the guidelines are:

Individual – Minimum Deductible is $1300

Maximum Out of Pocket is $6450

Family – Minimum Deductible is $2600

Maximum Out of Pocket is $12900

HDHPs that are HSA compatible should be identified as such by the carrier. They are set up as deductible/coinsurance plans, and will not offer copays on services.

How Do I Set Up A HSA?

Being a financial product, banks or other financial institutions that are members of the FDIC usually offer HSAs. You would want to compare fees and interest rates between the options to find one that is best for you. Some health insurance companies offer HSAs, as well as some employers offer them to their employees as well. However, as it is your account, you are free to make the decision about where you open your account.

What Expenses Can I Pay Using My HSA?

Qualified expenses typically include:

-doctor visits, lab work, x-rays, and hospital expenses

-chiropractic expenses

-dental care (although cosmetic procedures generally excluded)

-physical therapy

-mental health services

-eye/hearing care and materials (glasses, contacts, hearing aids)

-prescriptions

-diabetic supplies

-maternity expenses

Full List of IRS allowable expenses

*HSA funds can not be used to pay monthly insurance premiums*

Important Information Regarding Funds in the HSA

While there is a set limit of how much you can contribute to the HSA account each year, this does not limit the balance that can be in the account at any given time. For example, if you contribute the maximum amount allowed for the year 2015 and do not use any of the money for medical expenses during the year, you will not lose the money in the HSA. It will roll over to the next year, and you can resume making contributions in 2016 according to the new limits for that year.

If you choose to switch to a new insurance plan that is not a qualified HDHP, you will no longer be able to make contributions to the HSA account; however, you are still able to use the remaining balance for qualified medical expenses on the new plan.

Rachel Cullor is a licensed Enrollment Specialist at American Exchange. For a free consultation with a licensed agent call 1-888-995-1674 or email info@americanexchange.com. You can email Rachel directly at rachel.cullor@americanexchange.com.

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