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Health Insurance Medical Savings Account
Health Savings Accounts and High Deductible Insurance Plans
By A.M. Hyers
Health Savings Accounts are designed to compliment high deductible
group and individual insurance policies. Consumers often choose
high deductible policies in order to pay a lower premium. The amount
saved by purchasing the higher-deductible/lower premium policy is
contributed to a HSA account to pay for qualified medical expenses.
Dollars contributed into a HSA by an individual or an employer
are considered pre-tax. In this way, a Health Savings Account works
much like an Individual Retirement Account. The contributions to a
HSA are tax deductible and grow tax deferred. A money market account
can be used to safely invest the contributions until they might be
needed. (In addition, many plans offer mutual funds as an investment
option in order to further increase the value of the account.) Plan
owners are not taxed on any interest or fund appreciation in the
account as long as funds are used for qualified expenses.
Unused dollars in a HSA plan rollover year to year while the
account value increases through tax deferral. The plans are
portable, meaning the contributions are not lost should coverage be
discontinued with the insurance company. The insured owns all
deposits and can name a beneficiary for the proceeds at passing. If
funds still remain in the account at age 65, they are usually
withdrawn by the owner and taxed as ordinary income. (Once age 65 is
reached most consumers discontinue their health insurance plans, opt
into Medicare and purchase a Medicare Supplement.)
Eligibility and Contribution Limits
There are a few criteria that must be met in order to participate
in a HSA. Namely, individuals or employees must be enrolled in a
high deductible health plan. An annual deductible of at least $1,000
for an individual and $2,000 for a family must be selected. In
addition, participants must not be enrolled in another qualified
high deductible health insurance plan or be enrolled in Medicare.
Contribution limits for 2006 are $2,700 for individuals, $5,250
for families or the amount of the deductible- whichever is less.
Contributions are pro-rated based on the calendar year. If
enrollment occurs in July, then only 50% of the contribution limit
can be deposited in that particular year. The full amount could be
contributed the next year.
Health Savings Accounts are designed to be easily maintained and
operated. They can be managed online at websites set up by the
provider. Additionally, many companies issue checkbooks or credit
cards to the insured that draw directly from the HSA funds. In many
cases, a high deductible insurance policy coupled with a Health
Savings Account will provide more savings to the insured than a
traditional insurance plan.
About the Author
A.M. Hyers has been working in the insurance field for over ten
years. He is the owner/operator of Ohio Insurance Plan, an
independent agency providing quotes and information on various
insurance products in Ohio, Missouri and Georgia. To learn more,
please visit
http://www.ohioinsureplan.com
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