Health Saving Accounts for Increasing Health Care Costs

Increasing health care costs have been a major problem and it’s even getting worse.

It’s a problem that is been wrestled with by employers, employees, insurance companies, health care providers and the government alike.

In an effort to control the runaway costs for medical services and insurance coverage, the government passed a sweeping health care bill in 2010.

There are many health plans that compete to meet the health care needs of a nation.

Among them are high deductible insurances.

Because of their high deductibles, they carry low monthly premiums.

Also, once enrolled in a high deductible insurance, one can have a health savings account.

This account has several benefits to employers and employees alike.

Health Savings Account requirements

A Health Savings Account(HSA) is an individual health account for high deductible health plans.  

Health Savings Account requirements and high deductible health plan requirements are regulated by the US Treasury.

HSAs were designed to give greater choices to persons over their health insurance.

The rules regulate contribution, eligible expenses, qualified medical expenses, taxes, changes and distributions.

Health Savings Account requirements

There are  health savings account requirements regarding enrollment in an HSA.

Some of those requirements include:    

• You must first be enrolled in a high deductible health plan
• The minimum deductible for a single person is  $1,200 
• The minimum deductible for a family is $2,400 
• Have no other plan that reimburses you for medically related deductible
• The a maximum annual contributions.  In 2011 they were
• $3,050 for singles   
• $6,150 for families    
• Additional $1000 “catch-up” contribution between age 55 - 65

• Withdrawals must be for eligible medical expenses including
• Doctors Visits  
• Prescription Drugs    
• Over the Counter Medication  
• Acupuncture
• Chiropractic 
• Dentist    
• Eye Doctor

Penalties

Health Savings Account requirements also apply to penalties.

Any breach of the Health Savings Account requirements draw penalties including:

• 10% penalty and ordinary income tax imposed on withdrawals for non qualified medical expenses

After age 65, your HSA can be withdrawn and used for non qualified medical expenses without a penalty. 

If used for non medical expenses, though, it is still subject to ordinary income tax.