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Health Savings Accounts

In an effort to give Americans more control over their healthcare decisions, and to help reduce their overall healthcare costs, a tax-free Health Savings Account (HSA) can now be used to pay for qualified health expenses incurred by business owners, employees, their spouses, or their dependents. In order to qualify, an individual must have a high deductible health plan (HDHP). Most insurance carriers offer qualified HDHPs

MillerWade HSA benefits & advantages

  • Lower and potentially stabilized monthly health insurance premiums
  • Immediate tax-savings (all qualified deposits are 100% deductible)
  • Long-term growth potential (the only way to actually “make money” with a healthcare plan)
  • Tax-free withdrawals to pay medical expenses covered under the policy, and for many medical services not covered by insurance (dental, vision, acupuncture, alternative medicines, etc.)
  • Tax-free withdrawals to pay for supplemental benefit plans, long-term-care insurance, COBRA premiums, or health insurance premiums while unemployed.
  • Details:
  • HSAs are open to individuals covered by a high deductible health insurance plan. The annual deductible must be at least $1,250.00 for individual coverage, and at least $2,500.00 for family coverage.
  • HSAs are a significant improvement over previous medical savings vehicles, which were limited to employees of small businesses and the self-employed and also required health insurance policies with much higher deductibles.
  • Individuals with existing medical savings accounts (MSAs) can either retain them or roll the amounts over into a new HSA.

Taxes:

  • Contributions to HSAs by individuals are fully deductible, even if the taxpayer does not itemize.
  • Contributions by an employer are not included in the individual’s taxable income.
  • Individuals, their employers, or both can contribute tax-deductible funds each year up to the amount of the policy’s annual deductible, subject to a cap of $3,250.00 for individuals and $6,450.00 for families.
  • Individuals over age 55 can make extra contributions to their accounts of $1,000.00 per year and still enjoy the same tax advantages.
  • The interest and investment earnings generated by the account are also not taxable while in the HSA. Amounts distributed are not taxable as long as they are used to pay for qualified expenses.
  • Amounts distributed that are not used to pay for qualified medical expenses will be taxable, plus a 20% penalty (until age 65) to be applied to deter the use of the HSA for non-medical purposes.

Distribution of Funds

HSA funds can be used to cover qualified medical, dental and vision expenses such as insurance deductibles, co-payments for office visits and prescriptions, etc. In addition, HSA funds can be used to purchase over-the-counter drugs, long-term care insurance, and to pay health insurance premiums (COBRA) during any period of unemployment. The process of withdrawing funds is very simple with the SmartCardâ„¢ HSA debit card. Similar to banking debit cards, the SmartCardâ„¢ screens all requests and only allows qualified HSA purchases.

Ownership

HSAs are portable, so an individual is not dependent on a particular employer to enjoy the advantages of having an HSA. Like an individual retirement account (IRA), the HSA is owned by the individual, not the employer. If the individual changes jobs, the HSA stays with the individual.

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