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Opening a Health Savings Account

atmMore individuals have been moving to high deductible plans and Health Savings Accounts (HSAs) to cut monthly costs.

Whether your employer is moving the company to a high deductible plan or if just makes more financial sense for you considering the following tips:

  • The individual contribution limit for a HSA is $3,100 in 2012. For families, the limit is $6,250 in 2012.
  • Try to avoid choosing a plan with a really high deductible if you do not have enough funds in the HSA or in your savings to cover the expense and wouldn’t over the next couple years. If you have a $10,000 deductible and you reach it after a serious injury, you would be expected to pay those out-of-pocket expenses and you almost undermine the point of having health insurance.
  • Open a HSA with a bank or other third-party service. If you switch health insurance companies or plans, then you may lose the funds in your HSA or not be able to transfer those funds over.
  • Make sure that your health insurance plan is compatible with a HSA. HSAs are only compatible with high deductible health plans. To be compatible, a health insurance plan must have a deductible of at least $1,200 for an individual and $2,400 for a family. Is your plan not compatible? Then compare plans on the individual health insurance market and get a new plan that will work.
  • HSA contributions are tax deductible. But if you use the funds for expenses, medical or not, that are not approved then you will face a tax and penalty (except for those over the ages of 65).
  • HSA funds can be used for Medicare costs. Whether you want to pay Medicare premiums, out-of-pocket costs or get a Medicare plan with more coverage, HSA funds can be used.
Health Care Reform, Individual Health Insurance