Let’s go over Health Insurance plans that have a Health Savings Account structure.
Health Insurance plans with Health Savings Accounts (HSA’s) features are the least understood health insurance plans. There are actually two parts to making them work effectively. It’s important to note, they are not recommended for everyone as there are advantages and disadvantages for how they function.
Two Parts to HSA’s
Health Insurance Plan: The HSA is a high deductible plan WITHOUT up-front doctor visit copays (yet your annual physical exam is covered before the deductible). The largest advantage as you can see in the example below is that the maximum out-of-pocket in an HSA style plan is lower at $6,600 when compared with the a comparable standard plan at $8,150. HSA plans use the same network of doctors as the standard plans for each carrier. With HSA plans you pay the full cost of a doctor visit of let’s say $200 instead of $50 copay, compared to a standard plan HSA style plans offer a lower max out-of-pocket since less benefits are provided up front.
Health Savings Account: This is an actual savings account that you put money into that is tax deductible when it goes in, grows tax free and pays out tax free for qualified medical expenses (you cannot pay monthly health insurance premiums with this money). The government never touches money going in or out. Also, the money never “expires” it can be used for qualified medical, dental and vision expenses anytime in the future for household family members. I personally have an HSA and use KeyBank, not many local banks set up these checking accounts anymore.
There are primarily two different types of people that HSA’s are best for. First, is the person that knows that for the current year they are going to spend a significant amount of money on medical expenses, such as someone that’s going to need a $20,000 knee surgery. The second type of person is someone that uses very low amounts of medical care and wants another way to get a tax deduction and save money for future medical expenses.
2020 Contribution Limits:
- One person = $3,550
- Family (2+) = $7,100
- Catch-up (over Age 55) = $1,000
For example, if you are a couple and both of you are 57 years old with an individual health insurance plan that is HSA eligible for the entire year you can contribute up to $8,100 (with the catch-up amount). If your income for the year is $70,000 then with the HSA tax deduction your taxable income base would be $69,900. This saves you a considerable amount off your annual taxes, similar to contributing to a 401-K retirement account. I am not an accountant, so make sure to speak with an accounting professional before proceeding and confirm if this is correct for your specific situation. You need to have the HSA health plan for the entire year to contribute the max amount. In years when you do not have an HSA plan for the all twelve months, you would need to pro-rate the amount on a monthly basis to determine the amount you can contribute.
In conclusion, the Health Savings Account health plans are not for everyone, but do have value for those that want to fully utilize the benefits. If you have any questions give us a call at 425-802-2783.
Below are our agency’s areas of expertise:
- Health Insurance (Every company in Washington State)
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Gary Franke and Tamara Chandler
Independent Broker
Achieve Alpha Insurance LLC
12505 Bel-Red Rd, Ste 106
Bellevue, WA 98005
425-802-2783
gary@achieve-alpha.com
www.achieve-alpha.com