Most companies or individuals do not understand the benefits of the fairly new HSA accounts created to help offset the rising costs of health care. What is an HSA?: Health Savings Account, it is a personal account set up by an employer, of which both the employer and the employee can contribute up to the maximum amount allowed, $2900 single and $5800 per calender year (indexed to inflation). Unlike HRA or Flex plans, your money rolls over each year and it goes with you if you leave your job. The plan is not popular with the Democratic party because their view it is a tax break for the wealthy. I agree it is employer driven, however-Everybody benefits from HSA plans.
If the employer funds the HSA for an employee (for whatever amount they wish) it is a tax deduction for them, premiums are pre-tax so FICA tax is saved, the employees receive the same tax advantage, any portion of the premium they pay is also tax deductible from dollar one (the 2% of income does not apply), most companies offer prescription drug discounts, free well visits once a year, OBGYN are generally just a co-pay, and of course everything you purchase over the counter for prescriptions, aspirin, eye glasses, orthodontia, are tax deductible (and a lot more). Your contribution to your HSA is tax deductible, it grows tax-free in an array of investment selections (if you reach a certain dollar amount contribution-generally around $2000), and most companies offer on-line services that you can see what your next prescription or services will cost you.
The real difference: A high deductible out of pocket is one of the requirements, most carriers put that at 1500 single, 4000 family, your premiums are generally lower than traditional health care, what that means is the first $1500 is on you, then the plan resorts to regular co-pays and prescription co-pays (if you spent 1500 you now have a 1500 deduction).
Lets say you go to the hospital for a major procedure like open heart surgery, normally you pay your out of pocket deductible (1,000, 2500, etc which is not tax deductible unless you reach 2% of AGI and anything over that you can deduct) the insurance pays 80% and you are responsible for 20%-as my six year old would say-that's a really big number.
Under the HSA, you would pay the 1500, and then 300 a day for 5 days in the hospital or 3000 total(which is now a tax deduction). However, that is your limit of your liability-3000, everything then resorts back to normal co-pays for drugs etc. Is essence, you are insuring catastophic vs. incidental.
Everybody can win with an HSA, one of the biggest causes of bankruptcy is still from medical bills.
There a few rules to abide by that IRS has established. It may be worth talking to an expert on HSA plans to see if it matches your companies needs. If you are retired with passive income you can also qualify for an HSA.
Frank J. Eberhart, CEP, RFC http://www.bookworm.tv
I'm Frank J. Eberhart, CEP, RFC and a high net worth financial advisor and author that provides health care, 401K, wealth services and institutional money management to my clients, and have an HSA for my own company. My next book will address the 401k, health care, and how to obtain an SBA loan (fill in the blanks and take it to the bank!)
My current book will help you set up your estate, budgets, and investments it is designed to help you understand how it works.
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