Group Medical Insurance - Health Savings Accounts
HSAs are tax-advantaged plans used to accumulate dollars to pay for medical expenses. HSAs were established by the Medicare Prescription Drug and Modernization Act of 2003.
Individuals under age 65 participating in a high-deductible health plan defined below. Covered individuals include the HSA owner, spouse and dependents. According to the IRS, the 2007 minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs are:
- Individual - $1,100 minimum deductible with a $5,500 out-of-pocket expense maximum.
- Family - $2,200 minimum deductible with a $11,000 out-of-pocket expense maximum.
Annual contributions to an HSA of up to 100% of an individual's health plan deductible may be made. The numbers for 2007 are $2,850 for self-only HDHP coverage, and $5,650 for family HDHP coverage. (In 2008 self-only HDHP coverage will be $2,900 and $5,800 for family HDHP coverage). Individuals between the ages of 55 to 65 may make catch-up contributions.
Earnings grow tax-free. Account beneficiaries may withdraw money tax-free for current and future qualified health care costs including:
- physician's fees
- retiree health insurance premiums
- COBRA coverage
- qualified long-term care services
- Medicare expenses
- (non) prescription medications
- needed hospital services not covered by insurance.
Non-qualified withdrawals are taxable as ordinary income and subject to a 10% penalty.
HSAs are portable and may accumulate over time. Tax-free transfer to a spouse is permitted upon the owner's death.
Refer to Publication 969 on the IRS website for further details on HSA plans here.