Health Savings Account Blog

"Everyone wants an insurance plan that has low or no deductibles and co-pays for office visits and prescriptions. What they don't realize is that they're paying a lot for those privileges," said Jeff Marshall, director of sales for the AVMA Group Health and Life Insurance Trust. Marshall also notes 25% of Trust participants have Health Savings Account-qualified health care plans.

"If they can afford to self-pay for the smaller things, it definitely behooves them to look at HSA-qualified plans, because the premium differential alone can often save thousands of dollars," said Marshall

To illustrate the savings potential of Health Savings Accounts, Marshall cited a recent example; his company worked with a Florida veterinarian who was looking for a cost-effective alternative to the health insurance coverage he had been enrolled in for years through GHLIT. After evaluating his current health insurance plan options, the veterinarian decided to switch to a Health Savings Account and high-deductible insurance plan through the Trust.

With the new plan, the veterinarian’s annual deductible limit and maximum out-of-pocket expenses increased, but the veterinarian's annual premiums were reduced by half. Ultimately, the veterinarian saves approximately $3,000 per year as a result of the switch to the HSA plan – and more healthcare services and products are covered by the Health Savings Account than by his previous healthcare plan. (See IRS Publication 502, www.irs.gov/publications/p502/index.html, for a list of HSA qualified medical expenses.)

"Premium savings can be invested using pre-tax dollars, up to the annual contribution limit, into an HSA and withdrawn tax free to defray the cost of higher deductibles, co-insurance, and qualified out-of-pocket expenses," Marshall said. "Plus, every dollar they put into that account reduces their taxable income, so it's a real savings vehicle."

The 2010 maximum contribution to Health Savings Accounts increases to $3,050 for individual coverage and $6,150 for those with family coverage. By comparison, the 2009 maximum contribution was $3,000 for individual HSA plans and $5,950 for family plans. Also, Health Savings Account participants aged 55 and older can contribute an additional $1,000 in 2010, which is the same as in 2009.

In addition to lower premiums and tax-free contributions, there are other benefits to enrolling in Health Savings Accounts. For example, many Health Savings Account participants can invest their funds into a wide variety of high-interest yielding investments, including mutual funds, stocks, bonds, certificates of deposit, and money markets. Furthermore, invested funds will grow tax-free for as long as they are in the Health Savings Account.

Health Savings Accounts also be valuable for individuals interested in retirement planning. For example, funds from Health Savings Account can be used to pay the premiums on qualified long-term care plans as well as Medicare premiums, deductibles, co-pays, and co-insurance, excluding only Medicare supplemental insurance and Medigap policies. Additionally, there is no penalty to withdraw Health Savings Account funds to pay for non-qualifying expenses (such as a non-healthcare expense) once a Health Savings Account holder reaches the age of 65 or older.

"The beautiful thing about Health Savings Accounts is that you're lowering your taxable income and your money can grow tax free until you need it," Marshall said. "Most important, you have more control because you're creating your own path for spending your health care dollars."

Individuals thinking about opening Health Savings Accounts should always speak with their accountants or tax advisers before opening the Health Savings Accounts in order to determine whether Health Savings Accounts provide the most advantageous savings potential and healthcare coverage option for their needs. Contact us today for more information about how we can help you get the best Health Savings Accounts for your budget and lifestyle or for more information about Health Savings Account programs in general.