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HSA Qualifications

As the cost of health care coverage continues to rise as of 2010 and individuals and companies look for alternatives, one option to consider is a Health Savings Account (HSA). The HSA combines a savings plan with major medical insurance coverage, which helps keep the premiums relatively low. Money contributed to the savings account can be applied to meet the major medical plan deductible as needed and can be withdrawn on a tax-free basis to pay for eligible medical expenses. Contributions to the account are made on a pretax basis, meaning they will lower the insured's adjusted gross income.

  1. Accompanying Major Medical Plan

    • An HSA must include a high-deductible major medical insurance plan. As of 2010, the minimum allowable deductible for a plan to be HSA-eligible is $1,200 for a single person and $2,400 for a family. Maximum deductibles are $5,950 for a single person and $11,900 for a family.

    No Co-Pays

    • The major medical plan cannot provide any co-pays before the minimum deductible level is reached, such as for doctor's office visits or prescription drugs. The only exception to this rule is that payment for preventive care is permitted before the deductible is reached, such as for a periodic prostate exam or mammography.

    Other Medical Coverage

    • Insureds cannot be covered by another form of major medical insurance, such as through a group health insurance plan at their or their spouse's workplace. However, if insureds are covered by a plan that only offers wellness or preventive care, or for only dental or vision care, they can still purchase a HSA for their major medical coverage needs.

    Age Restrictions

    • The only age restriction to open an HSA is that the insured must be under age 65, which is the time when Medicare coverage eligibility begins. Also, when the insured reaches age 55, he can contribute an additional $1,000 per year into his HSA as of 2010.

    Contribution Amounts

    • The insured is not obligated to contribute any money to the HSA, although the less he contributes, the less money he will have to apply to the deductible or earn interest. As of 2010, the maximum allowable annual contribution is $3,050 for a single person and $6,150 for a family. Obviously, the insured is required to make premium payments for the major medical insurance component.

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