Health savings accounts (HSA) are designed to allow individuals and families to save money tax free to be used for health-related expenses. Money in an HSA does not expire at the end of the year. Similar to a traditional savings account, the money rolls over from year to year, earning interest. HSAs are not available to everyone though; the federal government has certain requirements that an individual or family must meet before being able to open a HSA.
High Deductible Health Plan (HDHP)
Individuals must be covered under a HDHP to be eligible for a HSA. Kimberly Lankford from Kiplinger Personal Finance reports that the minimum individual deductible during 2009 to qualify is $1,150 and for a family is $2,300. The individual is not allowed to be covered under any other insurance plan not considered a HDHP, such as secondary insurance.
Age and Veteran Coverage
Anyone under the age of 65 and covered under an HDHP is eligible for a HSA. Medicare recipients are not eligible because Medicare is not an HDHP. HSAinsider.com also states that veterans who have received benefits from the Veterans Administration within the past three months are also not eligible. Active military personnel who are covered by Tricare are ineligible because Tricare does not offer an HDHP.
Out of Pocket Expenses
Excluding premiums, out of pocket health care expenses for an individual cannot be in excess of $5,800 per year, or $11,600 per family. These amounts include both deductibles and insurance co-payments.
Income Limits
There are no income limits for an HSA. Tax benefits are the same no matter the income level. Individuals should file their annual income taxes to take full advantage of the tax savings offered by HSAs. Money can be contributed tax free, earn interest tax free and be spent tax free when used for health care expenses. The savings can be substantial.
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