Health Savings Accounts

A Health Savings Account is an alternative to comprehensive health insurance; it is a savings vehicle that allows people a different way to pay for their health care. HSAs enable you to pay for current health expenses and save for future medical and retiree health expenses on a tax-free basis. You use HSAs in conjunction with traditional health insurance policies as long as the policies are "high deductible" policies.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. You own and you control the money in your HSA. You decide how to spend the money without a health insurance company telling you what to do. You also decide what types of investments to make with the money in the account in order to make it grow.

Watch a presentation about HSAs

Contributions

2010 HSA Contribution Limits

  • Self Only: $3,050
  • Family Coverage: $6,150

2010 HDHP Deductibles & Out-of-Pocket Maximums

Self Only

  • Annual deductible: not less than $1,200
  • Out-of-pocket expenses: not more than $5,950

Family

  • Annual deductible: not less than $2,400
  • Out-of-pocket expenses: not more than $11,900

The annual catch-up contribution limit (for HSA-eligible individuals who are age 55 or older), set by statute, remains at $1,000 for 2010.

Eligibility for Health Savings Accounts

To be eligible for a Health Savings Account, you must be covered by a HSA-qualified High Deductible Health Plan (HDHP) and must not be covered by other health insurance that is not an HDHP. You are only allowed to have auto, dental, vision, disability and long-term care insurance at the same time as an HDHP. You may also have coverage for a specific disease or illness as long as it pays a specific dollar amount when the policy is triggered. Wellness programs offered by your employer are also permitted if they do not pay significant medical benefits.

The policy does not have to be in your name. As long as you have coverage under the HDHP policy, you can be eligible for an HSA (assuming you meet the other eligibility requirements for contributing to an HSA). You can still be eligible for an HSA even if the policy is in your spouse’s name.

  • You cannot establish and contribute to an HSA unless you have coverage under a HDHP.
  • You are not eligible for an HSA after you have enrolled in Medicare. If you had an HSA before you enrolled in Medicare, you can keep it. However, you cannot continue to make contributions to an HSA after you enroll in Medicare. If you received any Veterans Administration benefits in the past three months, you are also ineligible to contribute to a HSA.
  • If you are someone else's dependent
  • You can't have an HSA if you are considered a dependent on somebody's tax return.

Disqualifying Insurance Coverage

Even if you have a HDHP, you can still not be eligible for HSAs if you are covered by another insurance policy. For instance, if your spouse has traditional health insurance and you are covered under that, you can't contribute to a HSA.

You can, however, have some sorts of insurance, including insurance for accidents, long-term care, and dental care. You can also have Flexible Spending Accounts and Health Reimbursement Accounts if they are for limited purposes and reimburse expenses covered by the HDHP after the deducible.