Understanding Health Savings Accounts (HSA's)
Health Savings Accounts (HSA's) are designed to help individuals save for future medical and retiree health expenses on a tax-free basis.
Are you eligible for an HSA plan?
You are eligible for and HSA if you are covered by a high-deductible health insurnace plan (HDHP), aren't covered by other health insurance, are not enrolled in Medicare, and can't be claimed as a dependant on someone else's tax return.
What makes my insurance policy an HDHP Plan?
An HDHP is virtually any health insurance plan that has a high minimum deductible and does not cover the initial costs or all the costs of medical expenses. For 2010, that deductible amount (as dictated by the IRS) must be at least $1200 for an idividual or $2400 for family coverage.
What is the basic concept of an HSA?
According to Richard A. Collins, United Healthcare's CEO, "Lower heath insurance premiums, tax savings and greater control over health care spending are attracting more consumers to look closely at HSA's".
You save money on your insurnace premium by having a high deductible, and you put that savings in a fund (HSA) to meet future medical expenses. In esence, you pay a portion of your Health-care budget to yourself instead of a insurnace company. HSA dollars can then be used to reimburse yourself for medical and dental expenses incurred by you, your spouse or eligible dependents (children, siblings, parents and others who are considered an exemption under Section 152 of the tax code) - http://www.cigna.com/our_plans/medical/fsa/fsa_health.html
How do you use your HSA account to pay expenses?
Money an be withdrawn tax-free for most medical expenses , including prescription drugs, doctor visits, medical testing, dental expenses and even alternative medical treatments. Typically, you'll receive a debit card from the financial institution where your HSA is held, andand simplyuse that card to pay for those expenses which aren't covered by your health insurance plan.
What happens to money you don't use?
Every year, the money not spent would stay in the account and gain interest tax-free.
How much can you contribute tax-free each year?
You may contribute any amount up to $3,050 for single coverage and $6,150 for family.
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