Health Savings Account (HSA)

If you are covered by an HSA-eligible health plan and satisfy other conditions, you can open an (HSA) Health Savings Account and begin saving money to help pay for qualified medical expenses.

How you can save:

  • Contributions to your account may be tax-deductible on your federal income tax return and, in most cases, on your state income tax return. (Consult your personal tax and legal advisors.)
  • You can pay for qualified medical expenses with tax-free withdrawals.
  • Unlike Flexible Spending Accounts, your HSA has no "use it or lose it" requirement and also stays with you if you change jobs or retire.

What are the 5 reasons individuals should open an HSA?

You know your needs better than anyone else, so shouldn't you be in control of making your own healthcare spending decisions? Created by the Medicare Prescription Drug Improvement and Modernization Act in 2003, HSAs are tax-free savings accounts that you can use to pay for qualified medical expenses, allowing you to control how your healthcare dollars are spent.

Tax savings
In the push toward consumer-directed health care, the HSA is one of the most innovative new approaches to healthcare financing designed to help individuals save for qualified current and future medical expenses on a tax-free basis. In addition, funds you withdraw from your HSA to pay for qualified medical expenses are tax-free. After-tax contributions you make (or that individuals other than your employer make on your behalf) to your HSA account each year are deductible on your income tax return in the same manner as an Individual Retirement Account (IRA) whether you spend it or save it (to the extent that you did not contribute more than what is permitted for the year). Distributions for other than qualified medical expenses are included in your income and subject to a 10% excise tax; however, at age 65 or if you become disabled, you can withdraw funds for any reason without an added excise-tax penalty.

Balance rolls over
The unused balance in your HSA carries over from one year to the next so you never lose any funds in your account. You can also use your HSA to pay for qualified medical expenses from a previous year, as long as they were incurred after the HSA was established (or as otherwise permitted by applicable law).

Funds contributed to an HSA belong to you and are completely portable. A portable HSA provides a long-term consistent account that moves with you through all of life's changes, including a new job, a new health plan, or retirement. Our HSA generally goes with you wherever you go and is yours for life (subject to the terms of the Custodial Agreement).

Reduced health insurance premiums
To qualify for an HSA, you must first have an HSA-eligible health insurance plan. Since these plans have high deductibles established by statute, they require a significantly smaller monthly premium from the individual or employee in an employer group offering.

Tax-free growth
Funds in the account can grow tax-free.

How Health Savings Accounts Work

A typical individual can contribute a maximum of $3100 for 2012, while a typical family can contribute $6250 in 2012 plus a "catch-up of $1000 in 2011 and 2012 for individuals over 55. Contibution amounts in 2013 will be $3250 for an individual and $6450 for a family. These contributions can be made as a lump sum or periodic contributions. Depending on age or time of enrollment, you may be eligible to contribute more. Check with your tax advisor for specifics. Additionally, a great feature of HSAs is that anyone (employer, family member, etc.) can contribute to your HSA.

How you can use your savings:

  • Standard medical services such as office visits and annual medical physicals
  • Prescriptions, some over-the-counter medicines, and healthcare products
  • Preventive and restorative dental care, as well as orthodontia for children and adults
  • Eyeglasses, contact lenses, and laser eye surgery

Are you eligible for an HSA?

In addition to being enrolled in an HSA-eligible health plan, there are certain conditions that must be met prior to opening a Health Savings Account. You cannot open a Health Savings Account if you:

  • Can be claimed as a dependent on anyone else's tax return.
  • Are currently receiving Medicare benefits.
  • Are enrolled in any non-qualifying health coverage that does not satisfy the statutory minimum-deductible requirements of Internal Revenue Code Section 223 (unless that coverage is limited to certain permitted types of coverage or insurance). If you have a Flexible Spending Account or a Health Reimbursement Arrangement with your employer, or if you are covered under your spouse's Flexible Spending Account or Health Reimbursement Arrangement, you may not be eligible to open a Health Savings Account. (Your employer's benefits administrator should be able to help answer whether your Flexible Spending Account or Health Reimbursement Arrangement will allow you to open a Health Savings Account.)

These conditions are subject to change. For more information, go to: http://www.treasury.gov/resource-center/faqs/Taxes/Pages/Health-Savings-Accounts.aspx

Dr. Don SchmidtCanyon Chiropractic Center - Boulder, Colorado
Thank you for saving us money on our health insurance! We really appreciated your willingness to 'hand hold' us through the process. It can be a daunting task to choose from all the available insurance plans out there. You made it almost easy!
Don MartingMartin Auctioneering - Longmont, Colorado
I can't thank you enough for helping me and saving me a significant amount of money. I truly believe that you had my best interest at heart.