Is a Health Savings Account right for you?

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(MoneyWatch) This fall is the time when most employers roll out changes to their benefit plans and workers are required to make their choices for the upcoming year. Employers are again stepping up their efforts to offer their employees more plans that allow them to get more involved in their health care choices.

One trend that continues to take hold is the drive to get employees to choose high-deductible health insurance plans. In fact, some large employers are planning to make high deductible health plans the only option for their employees.

As its name implies, high deductible health insurance plans come with high deductibles and are primarily designed to provide affordable coverage for major health and medical expenses. These plans come with significantly lower premiums and are a good option for younger and/or healthy workers with no significant conditions that require ongoing medical care.

When you choose a high deductible heal plan, it is typically paired with an account (called a Health Savings Account, or HSA) where tax-advantaged savings can be deposited. In fact, more employers are offering to make contributions into an HSA as an incentive to get their employees to enroll in the high deductible plans. Most employers and employees can lower their premiums by 40 percent with a high deductible HSA-qualified health insurance plan compared to a conventional co-pay plan.

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When you're covered under a high deductible health insurance plan, you'll have to pay out-of-pocket costs for routine doctor's office visits or trips to the emergency room until what you have paid equals the amount of the deductible.

To help you to pay these out of pocket costs, you open a Health Savings Account, or HSA, into which you and your employer can make tax free contributions to cover the amount of the deductible.

The HSA contribution limit for 2013 is $3,250 (up $150 from 2012) for self-only coverage and $6,450 for family coverage (up $200 from 2012). People age 55 and older can contribute an additional $1,000 over these limits. In 2013, the high deductible health plan must have an annual deductible of at least $1,250 for self-only coverage and $2,500 for family coverage.

Money in an HSA can be invested in funds similar to an IRA. All withdrawals of contributions and investment earnings are tax-free when taken out to pay for qualifying medical expenses, such as deductibles and co-payments.

If you don't use the money in the HSA for a given year it is not forfeited and can remain in your HSA and accumulate to build a fund you can use to pay for your future health care costs - even for such costs in retirement.

While a high deductible health plan can lower your overall costs for health insurance but still have you covered for unexpected and large medical costs, be careful to make sure you have the cash on hand to pay the initial out of pocket costs. You'll need to come up with the cash to pay out-of-pocket costs, either from your HSA or from your own savings, to satisfy the deductible before your health insurance coverage kicks in.

[nofway100]

Not all states conform with Federal HSA tax regulation. The 3 states w/income taxes that do not conform are CA, NJ & AL. Here is a political question I posted elsewhere, sorry for the political rant; Christie is not a good Republican: Why are HSA accounts taxed in New Jersey?
NJ along with CA (democratic Gov/Senate/Assembly) and AL (not sure) are the only states with income taxes that do not allow state tax deduction for Health Savings Accounts (HSA) and also tax any earnings from these accounts. In 2011, WI led by Republicans, conformed with Federal HSA tax regulations. Why is Christie considered a good conservative when he has not taken the lead in this area. I am independent, small business owner w/ a HSA and am not sure why there is no discussion regarding his inaction in this area. And just because he is out of shape and gets his own benefits paid for is not a good answer.

[johnlockesghost]

HSAs are the real answer to national health care. If promoted by the government, instead of Obamacare, where everyone has an HSA, the requirement for Medicare would disappear. People unable to contribute to an HSA should be subsidized, but not allowed to roll the money over from year to year. BTW, those that do have an HSA have the option of paying for their day-to-day health care expenses out of pocket without touching their HSA, thus allowing their HSA to accumulate at a faster pace. If one is young and in good health, over time HSAs, used as a welth building tool can make you wealthy in your old age when you may really need the money for maintaining your health.

[endrepubs]

When did they change the rules to let you keep or rollover what you don't use in a given year?

[Nam-Vet]

There are 2 HSA type accounts that I know of.
HSA and HSA Flex.
The HSA is owned by you and rolls to the next year.
The HSA Flex is owned by your employer (I believe) and renews each year.
Google for HSA Flex.

[Nam-Vet]

I have a HSA account and it is easy to use. My HSA account is through Bank of America. B of A charges $4.50 per month for Electronic Account Maintenance fee, regardless if you use the account or not. This amounts to $54.00 per year taken out of my balance. Shop around for the best deal !

[Hutterite]

Health savings accounts aren't a bad idea especially for the purchase of preventive items such as fitness equipment. What we really need is a single payer health care (not insurance) system that includes all of us.