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Health Savings Accounts (HSA's)
The next generation of HSA's (Formerly MSA's) became available January 1st, 2004 to all Americans not entitled to Medicare.
"The goal of the HSA's is
to spark a consumer revolution in health care, to get the consumer back in the
game, to give the consumer the resources and wherewithal to make choices."
U.S. Rep. Paul Ryan (Republican, Wisconsin)
(Milwaukee Journal Sentinel - December 27, 2003)
The HSA Details...
What is an HSA?
The HSA is a tax-sheltered savings account similar to an IRA, but contributions are earmarked for medical expenses and can be withdrawn tax free. Deposits are 100% tax deductible and can easily be used to pay for small and routine medical expenses with tax free dollars, until a deductible has been met.
Where do the contributions go?
Contributions are 100% tax deductible in 2004. What is not used in the account each year stays in the account and continues to grow interest on a tax favored basis to supplement retirement just like a traditional IRA, but itís a Medical IRA. These tax deductions are in addition to any IRA's you currently have and will not affect those plans in any way. Except of course, to lower your tax bill.
What if I have a large medical bill?
Larger medical expenses are covered by a low cost health insurance policy.
How do I save money on my medical bills?
When an HSA is combined with a higher deductible, HSA qualified health plan (required) then the HSA and the insurance policy is meant to replace a much higher cost, more restrictive, traditional health insurance plan. Traditional health plans with co-pays are typically 30 to 70% higher in cost, more restrictive to use than an HSA and still leave you with out of pocket expenses most people don't expect to pay.
How does it Work?
Take the premiums you currently spend on a high cost traditional individual or group plan and split it into 2 parts. One part will go to pay for the lower cost higher deductible health insurance plan and the other part. "The amount saved" would go into the medical IRA. There is complete flexibility on where the saved part of the premium goes. (We discuss this at application time.) The savings placed in the medical IRA can be used for the small medical expenses until the deductible is met. Should the need arise for a larger medical expense then the higher deductible health plan would kick in and limit the out of pocket expenses to the deductible each year.
What applies to my deductible?
All covered medical expenses apply to the deductible each year including Doctors office visits, Prescriptions, and any major medical claims. HSA family plans have one deductible for the entire family. So, all covered medical expenses for the entire family apply to one deductible.
How many deductibles are there?
No more deductibles for each family member. There is only one deductible for the entire family when 2 or more people are covered on the same plan. We typically suggest a 100% co-insurance level to limit the entire out of pocket expenses to the chosen deductible.
What else can the HSA be used for?
Tax free dollars can also be used to virtually pay for all other medical expenses typically not covered under traditional types of health plans like dental, eyeglasses, contact lenses, lasic eye surgery and much more...
We understand HSA's. We know how to set them up for simplicity. We know how to explain them to our clients.
Please contact us at (248)478-0667 or email@example.com with questions.