Health Insurance Values » HealthLog with Dave Keller

HSA-qualified high-deductible plans

Nearly 6 million Americans under age 65 are covered by an HSA-qualified high-deductible health plan (HDHP), according America’s Health Insurance Plans’ 2008 HSA/HDHP Census. However many more do not understand what they are or have never heard about them.

Qualified high-deductible health plans are often called HSA plans. HSA plans are a combination of a health insurance plan and a special tax-advantaged savings account called a health savings account (HSA). The U.S. Treasury determines what types of plans are eligible to be paired with an HSA account.

In 2009 plans that are HSA-qualified must have a deductible of no less than $1,150 for a single person and no less than $2,300 for a family plan. The maximum out of pocket, which is sum of the deductible and plan coinsurance, cannot be more than $5,800 for a single and $11,600 for family.

If you purchase a qualifying plan you can then open an HSA account, where each dollar that you put into the account, up to $3,000 for single coverage and $5,950 for family coverage, is exempt from income tax. You can fund your HSA annually up to the limit, and unlike a flexible savings account (FSA) unused money can stay in your account and accumulate from year to year.

Because HSAs have higher deductibles they are often less expensive than traditional plans. Your premium savings can be used to fund your HSA account. And keep in mind that unused money continues to stay in your account each year, so there is an opportunity for generally healthy people to create a significant long-term savings account.

The savings that accumulate in an HSA can be used for qualifying medical expenses tax free, meaning that you received a tax deduction when you put the money into the account and you get to use the money tax-free when you withdraw it for a qualifying expense. When you turn 65 years old, you can use it as retirement savings just like you would an IRA or pension plan.