Health Savings Account plans offer three ways to save money that traditional health insurance policies lack. First, since the plans include health insurance policies that have a deductible, the premiums are lower than standard co-pay policy premiums. For plans that are qualified to work with a Health Savings Account (HSA), deductibles range from $1,200 to $5,950 for individuals and from $2,400 to $11,900 for families this year.
Second, money contributed to an HSA doubles as a tax deduction to lower taxable income and typically federal and state taxes. Only a handful of states don’t follow the lead of the federal government in making HSA contributions tax deductible. There are limits on the deduction you can take, though. Individual contributions may be up to $3,050 and contributions to family Health Savings Account plans may be up to $6,150. If you’re 55 or older, you can add an extra $1,000 to your contribution annually.
Third, HSA contributions are not taxed when the funds are used to pay for qualified health care expenses regardless of your age. After you reach retirement age, you can continue to pay for health care with tax-free funds, but if you spend HSA money on other things, it will be taxed as you withdraw it. As long as the funds remain in the HSA, earnings are not taxed. These accounts enjoy the same kind of rapid growth that IRA funds share.
HSA Health Plans Cover Preventive Care Just Like Other Forms Of Health Insurance
Before health care reform, no preventive care services were covered until the plan’s deductible was met. When you purchase a policy after health care reform became law, standard and HSA health plans provide 100-percent coverage with two caveats. You’ll need to get the services from an in-network provider who must report it using a correct preventive care code.