Health Savings Accounts (HSA) were created by the Medicare bill signed on December 8, 2003, by President Bush, and it became law in 2004. HSA were created primarily to help individuals and families save for the future using qualified medical plans with tax-free provisions. There is actually two parts to an HSA: (1) Medical insurance where the plans come without copays also called ?no copay plans” or “high deductible plans” or “catastrophic plans.” (2) The HSA is governed by the U.S. Treasury Department, who handles the funds you set aside in an HSA bank account used solely for your medical claims.
The funds that a policyholder sets aside for use of his medical claims can be tax-deductible if an HSA bank account has been set up and those funds placed in that account. For 2010 a person on an individual plan may set aside up to $3,050 per calendar year, and a family plan may set aside up to $6,150 per calendar year. Those who are 55 – 64 years old may add up to $1,000 extra, which is called a “catch-up contribution.” Monies in your HSA bank account are for your medical claims, as well as for dental and vision claims.
If you do not use the money in your HSA bank account for the stated calendar year, then your money will be rolled over for the next year. Think of your HSA bank account as your second checking account which is used only for medical claims that you may have during that year. Another way to look at this HSA bank account is your medical IRA account.
As your HSA bank account increases, you may use some of your money for investment purchases. Talk with your bank to find out what investment vehicles they may have for you. Please realize that if you use any money you place in your HSA account for non-medical reasons (including premiums for those 64 and under), you will be penalized and taxed for that amount. When you turn 65, you can use those funds for any medical services, and also to pay for medical insurance premiums.
U.S. Treasury information:
HSA Questions and Answers
Health Saving Account (HSA) insurance questions we get from our clients with our answers
- Do I need a specific HSA designated insurance plan? Answer: Yes.
- Do I need the insurance plan before getting my custodial (bank) account? Answer: Yes
- Can I obtain an HSA insurance policy if I am on Medicare? Answer: No
- Can I pay my own and/or spouse?s COBRA with my HSA monies? Answer: No
- Do I need to pay authorized medical expenses if I have not funded my account? Answer: Yes
- What is the last day I can fund my HSA account? Answer: April 14th of the following year.
- What happens to the money I do not spend? Answer: It rolls over tax-free to the following year.
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The information and advice on this website was deemed accurate when it was originally published. GNI cannot accept any responsibility or liability for any actions taken on the basis of the information provided, unless that information is subsequently confirmed in writing. For the latest up-to-date information please call us or check brochures and other published materials for latest revision/date.