Kentucky Health Insurance — HSA’s
How to best understand what really is an HSA or Health Savings Account and how will Kentucky Health Insurance– HSA’S benefit me??
Many people looking for Kentucky Health Insurance today are beginning to ask the question about what really is an HSA. Many people have heard the acronym HSA but really don’t understand what it really means or does for them. The basic components of the HSA are two fold. One is the heath insurance portion to pay for medical and prescription costs. The second component is the savings element which allows individuals to set aside money into a savings account at a bank. The money can be contributed one of three ways:
- Through an employer contribution
- By an individual either through payroll deduction or a deposit
- Any combination of the above
The benefit of the health savings account is that any monies contributed to that account is considered a tax deduction for that year’s income taxes (subject to the limits allowed by the Internal Revenue Service). The maximum contribution limits for 2010 are $3,050 for a single or $6,150 for more than one person.
In order for an individual to be eligible for an HSA account at the bank, that person must have a “qualified health plan”. That qualified health plan must have a high deductible, generally over $1,200 for a single or $2400 for more than one person.
The first step to having an HSA is securing the health insurance (the best way is through an experienced independent agent) and than to open the savings account.
The questions to consider in the health insurance is how much of a deductible do can you afford. The question to consider in opening the HSA are the fees to open and maintain the account, will you be issued a debit card or checking account to pay for un-reimbursed expenses and how is the savings account invested and what are the expected rates of return on your savings monies.
I now have my Health Insurance HSA, now what do I do?
Well it is important to understand why the HSA concept was even initially established. The HSA concept was developed and approved by Congress a few years back and the purpose was to encourage individuals to think about their own future health care expenses in their retirement years much like how one should consider their own income needs in their retirement years. The underlying premise was to have people not rely on the Federal Government solely for income and healthcare needs as seniors or in those “retirement years”. Basically if someone set aside money in a savings account the government is going to allow you to do that and deduct the amounts off of your personal income taxes. It is that simple.
One of the additional benefits allowed is that a person or family can also help offset the high deductible expenses using the HSA funds (assuming there are funds in the hsa account). If for example someone has a $2000 deductible and they have set aside $1200 in the hsa account and they have a doctor, hospital or pharmacy bill for $900. than they can use the hsa money for that expense.
The bank where the hsa is opened will usually give the account holder one or two choices to access the money. One is via a funded debit card limited to the actual account balance; the second choice is via a hsa checking account. In either case the individual can have access to the amounts funded to offset or pay these expenses. Generally, one will not use the hsa monies for minor purchase but will use it for more major expenses.
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