The HSA deductible (Health Savings Accounts) of a high deductible health plan (HDHP) is the dollar amount that a family or individual must pay for medical costs out-of-pocket before health insurance coverage kicks in. Because the deductible is higher than most other plans, the monthly premiums are less expensive.
The HSA deductible applies to most health care expenses unless the health insurance plan “waives” the deductible for a service. For example, if your plan requires a small copayment for routine doctor’s office visits, the copayment typically won’t count toward the deductible.
Examples of services that commonly count towards your HSA deductible include doctor visits (other than any copayment), outpatient surgeries and medical care received in a hospital.
Another health plan definition to be aware of is the out-of-pocket maximum. This is the most you’ll have to pay for your health care costs in a calendar year. This maximum is set to protect you from very expensive medical bills.
In general, most health expenses incurred go toward the out-of-pocket maximum. Once the maximum is reached after the HSA deductible is met, the health insurance company will pay for all covered health care services for the rest of the calendar year.
HSA Contribution Limits
The contribution limits for 2010 and 2011 are $3,050 for individual plans. The exact contribution limit is set by the Internal Revenue Service (IRS) each year. The funds used from your Health Savings Account can count toward your HSA deductible.
For a family plan, the contribution limits for HSAs in 2010 and 2011 are $6,150. If you are older than 55, you are eligible to increase your contribution by $1,000.
The money that is contributed to the HSA account is tax deductible. In addition, any earnings that are made on the invested money are tax deferred, and all withdrawals are deemed tax-free as long as the money is used for qualified medical expenses.
Out-of-pocket medical expenses currently include things such as vision and dental services, long-term care, chiropractic care, and over-the-counter drugs. But starting in 2011, over-the-counter medications other than insulin will not be considered eligible as medical expenses unless you have a prescription, and any money used from an HSA for non-medical expenses will be subjected to an additional 20 percent penalty.
In 2010 and 2011, the out-of-pocket health insurance policy maximum to qualify as a high deductible health plan is $5,950 for individuals and $11,900 for families.
Remember, most out-of-pocket expenses count toward the HSA deductible.
People who open an HSA need to make sure they keep all of their medical expense receipts and documents to prove that the withdrawals were used for qualified medical expenses. This will ensure the account holder won’t be subject to any tax or penalties.
A HSA is similar to any other bank account as it typically includes debit cards or checks. To be eligible for an HSA, you need to be enrolled in a HDHP (high deductible health plan). Many HDHPs will cover 100% of preventive health care, such as annual checkups and immunizations for children. However, all other expenses are subject to the deductible.
To learn more and view plans that include an HSA deductible, use our free service to speak with a licensed insurance agent about your personal health insurance needs.