|  | Healthcare Industry | Health Insurance

What Is General Information on an HSA?

With the increasing cost of health insurance, many Americans have turned to health savings accounts, or HSAs, to manage their costs. Individuals eligible for a health savings account contribute money to this account throughout the year. This money grows tax free as long as it remains in the account. The money remains tax free as long as it is used for medical expenses.

  1. Qualify for HSA

    • To qualify for a health savings account, the enrollee must have a high-deductible health plan for medical coverage and not be enrolled in Medicare or another medical insurance. The exception is for insurance that provides benefits under workers' compensation, for a specific condition, in case of accident, disability coverage, dental care, vision care, long-term care or a fixed daily rate for hospital costs. The enrollee must also not be considered another person's dependent for tax purposes.

    High-Deductible Health Plan

    • A high-deductible health plan operates similar to other insurance plans, although it maintains a higher-than-average deductible for the insured. High-deductible health plans can pay preventive care upfront while still maintaining the designation of a high-deductible health plan. For 2010, the minimum deductible a high-deductible plan can assign for a single person while still qualifying as a high-deductible health plan is $1,200 and $2,400 for a family. These plans also carry maximum out-of-pocket amounts to limit the potential financial hardship to enrollees. The maximum out-of-pocket amounts are $5,950 for a single person and $11,900 for a family.

    Benefits of an HSA

    • All money contributed to a health savings plan belongs to the account holder, even if the individual changes health plans in the future. All contributions and interest earned on the account remain tax free as long as all withdrawals are used for medical expenses.

    Tax Implications

    • Health savings plan offer several tax benefits to the account holder. First, all interest earned and retained in the account grows tax free. Second, most contributions made into a health savings account are tax deductible to the account holder. Account holders with a single coverage high-deductible health plan may contribute a maximum of $3,050 in 2010 and deduct this amount from their taxable income. Account holders with family coverage may contribute a maximum of $6,150.

Health Insurance - Related Articles