Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) are a new option for Floridians under the age of 65 for covering health care expenses. In 2003, President Bush signed these tax-free savings plans into law. They are intended as a tool to help individuals save for health care expenses while keeping monthly health insurance premiums low.
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Advantages to Owning a Health Savings Account (HSA)
- Low monthly premium
- Savings toward health expenses are tax deductible, even if you don’t itemize
- HSA earnings are tax-free
- Money not used this year rolls over for future medical costs
Disadvantages of Health Savings Accounts (HSA)
- You are responsible for paying the deductible and coinsurance on medical expenses, whether directly or through contributions to your HSA.
- Otherwise, limitations depend on the specific HSA plan you select.
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Features of Health Savings Account (HSA)
An HSA works in combination with any qualified health insurance plan that offers you a high deductible. By accepting a high deductible (a dollar amount that you pay each year before your insurance coverage begins), you pay a lower premium, which saves you money.
But what about paying for that deductible amount, in the event you need medical care? That’s where the HSA comes in. Money you have contributed to your HSA account can be used for those medical expenses. What’s more, any savings you don’t use this year will roll over into next year, giving you an even greater cushion for health-care costs in the future.
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HSA earnings are tax-free. Furthermore, your annual contributions to the account are tax deductible, even if you don’t itemize your deductions.
To open an HSA, you must have a high-deductible health plan (what is sometimes called "catastrophic coverage"). To qualify in 2006, your deductible must be at least $1,050 for an individual and $2,100 for a family. Your annual out-of-pocket expense on the plan must be at least $5,250 for an individual and $10,500 for a family.
As soon as you have a qualifying health plan, you can open an HSA at any bank or other financial institution that meets the IRS standards for being a trustee or custodian for an IRA. Some insurance companies can also handle your HSA for you.
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