Maximizing Your HSA
SAN MATEO, Calif. (PRWeb) January 25, 2007 -
To obtain an HSA, a consumer must purchase high-deductible
health plan (HDHP) insurance coverage. Consumers then can
fund HSAs up to the amount of their annual deductible each
year -- typically, ranging from $1,000 for an individual to as
much as $10,000 or more for a family. Earnings accumulate tax-
free, and withdrawals are tax-free as long as they are used to
pay for qualifying medical expenses.
According to the Bureau of Labor Statistics, 6 percent of all
private industry workers have access to an HSA. Even though
HSAs represent a relatively new health care coverage option,
the trade group America's Health Insurance Plans (AHIP) found
that HSA plan participation in early 2006 had tripled in the
previous 10 months, to nearly 3.2 million Americans.
"The tax-free benefit was devised to compensate for consumers'
taking on a greater share of their health care expenses with
HDHPs," Housser said. "But despite their growing popularity,
HSAs can be confusing."
Housser's tips for thriving with an HSA include:
1. Fund the HSA to the deductible. At a minimum, fund the HSA
up to the amount of your deductible. Then, even if you encounter
an expensive medical treatment that results in meeting your
deductible, you can pay the expense from the account, rather than
relying on credit cards or loans.
2. Fully fund the HSA. Next, determine your maximum annual
contribution, divide by 12, and save that amount monthly.
Automate the process if possible. Many HDHPs do not cover
expenses 100 percent after the deductible is met. Instead, more
like old-fashioned fee-for-service insurance coverage, the plan
might pay 80 percent while you pay 20 percent. When you
continue to fund the HSA, you make funds available to pay for
additional expenses. "There's no such thing as contributing too
much, as long as you don't go over your annual limit," Housser
said. "The money in the HSA belongs to you."
3. Get the best rate. Medical providers typically charge one rate
to those without insurance, or who pay for services in cash, and a
separate, "contracted" rate to insurers. Ask your medical provider
for the best rate, whether it is the contracted rate or the office's best
cash rate. Sometimes, the contracted rate - which can be as much
as 20 percent less than the cash rate - is available only if your
physician or other medical provider run your expenses through their
typical claims submission process.
4. Make expenses tax-benefited. Don't forget to take advantage of
tax benefits by running expenses through the HSA. Some accounts
simplify the process by providing a debit card or checks to access the
HSA. Other policies require consumers to submit forms requesting a
withdrawal from the account. Always pay providers directly from the
account or submit your expenses to the account for reimbursement.
"Otherwise, you're missing out on the tax benefits, and your medical
bills might not count toward your deductible," Housser cautioned.
5. Take what is yours. Some have compared the HSA to an IRA
(individual retirement account) for your health. Your contributions
belong to you, and you can keep the account if you switch jobs or
retire. "Even if you switch to a non-HSA plan, or retire and move
into a Medicare plan, you can still use your HSA funds to pay for
medical expenses," Housser said.
6. Celebrate after 65. Non-medical withdrawals from HSAs
face a 10 percent penalty for consumers younger than 65. But for
those over 65, the story changes: While consumers still must pay
tax on the withdrawals if they are not used for medical purposes,
the 10 percent penalty does not apply after age 65. "Regardless,
it's still wise to keep your funds in the HSA account for medical use,
" Housser said. "It's a rare senior who does not face extra medical
expenses at some point."
"By understanding their HSAs, consumers can take steps to make
sure the accounts are working for them," Housser said. "In today's
challenging health insurance market, the HSA can be a safe haven
from skyrocketing medical costs -- if you use it to take charge of your
own health."