Health Savings Accounts (HSA) are favored by people who want comprehensive health insurance that is individualized. Such programs also allow them to grow their savings tax free and can be rolled over from year to year. However, before contributing to a HSA, one must first be enrolled within a HDHP, or high deductible health plan. HDHPs have a deductible which is higher than standard insurance plans, so here is how to determine if you’re HSA-qualified.
What Is A HDHP?
A high deductible health plan offers insurance coverage. Its deductible is higher than standard insurance plans, and a maximum limit is placed on the sum of the out of pocket expenses enrollees must pay and the yearly deductible. HDHPs can offer benefits for preventative care without the need for a deductible or with deductibles which are lower than the minimum amount.
Preventative care would consist of things such as regular health checkups, as well as diagnostic tests or other procedures which are designed to assess the health of the patient. It would also include child and prenatal care, immunizations and programs for tobacco cessation.
Many Insurance Carriers Will Designate Their Plans as Eligible For HSA
However, there are other requirements that need to be met. For instance, you must not have other forms of healthcare coverage, although some ancillary coverage may be allowed. You also cannot be a member of Medicare, and you should not be claimed as a dependent on the tax return of anyone else.
When Does A HDHP Become Qualified For HSA?
The majority of HDHPs do not qualify for HSA. In fact, in 2016 it was found that less than 20 percent were eligible. A high deductible is just one of the many requirements that an HDHP must display, but other requirements include a limit on yearly healthcare costs and deductibles, which includes co-pay, and no coverage from insurance until the time in which the deductible has been met. Exceptions to this include dental costs, vision costs, expenses caused by accidents or treatment associated with preventive care or wellness.
The Internal Revenue Service provides minimum and maximum limits for healthcare expenses and deductibles on a yearly basis. For 2017, the HSA contribution limit is $3,400 for individuals and $6,750 for families. Catch up contributions for HSA (which are designed for those 55 years of age or beyond), is $1,000. Minimum deductibles for HDHP are $1,300 for individuals and $2,600 for families. The maximum HDHP expenses out of pocket (such as copayments, deductibles and other fees) are $6,550 for individuals and $13,100 for families.
Additional Things To Consider
Research firms have found that over sixteen million people in the United States used an HSA by 2015. These plans are important because they give people the ability to use funds which are tax free to cover various healthcare expenses, including visits to doctors, prescription medications and other costs which are qualified. In most cases their employers will be willing to provide matching dollars. However, providing HSA contributions first requires an HDHP.