By Cat Gautieri, CLTC
February 2010 

There’s an amazing way to save money on health care expenses and put your savings to work earning tax-free interest. How? By having an HSA (health savings account) health plan. This is a qualified high-deductible health plan with tax advantages. Here are some of the highlights:

- Cost. HSA health plans have much lower monthly premiums than traditional health plans, letting you realize big savings. You pay for services, as needed, which are applied toward the plan deductible.

- Tax advantages. With an HSA plan, you have an option to open a savings account to fund for future medical expenses or use for any other purpose. Any balance will roll over into the next year, compounding interest and investment earnings, growing tax-free. It’s amazing, but true – a retirement and savings plan within a health plan.

- Contribution limits. The federal government sets contribution limits each year. Your contributions are tax-deductible much like an IRA with an above-the-line tax deduction. For 2010, the contribution maximum for an individual plan is $3,050 and family plans are $6,150. For those over 55, a special catch-up contribution is permitted for an additional $1,000.  

- Withdrawal penalties. A qualified medical expense must be incurred on or after the HSA account is established. You can withdraw the money immediately to pay for eligible medical, dental, vision and prescription expenses or for long-term care premium payments. Most financial institutions will provide you with a debit card and checks, so withdrawing money to pay for medical expenses is easy.

- Eligibility. Individuals who aren’t covered by other health insurance or enrolled in Medicare and can’t be claimed as a dependent on someone else’s tax return are eligible for an HSA plan.

- Use of HSA funds to pay health insurance premiums. Generally, health insurance premiums aren’t qualified expenses. You can use HSA money to pay for long-term care insurance, COBRA healthcare continuation coverage, and healthcare coverage while you’re receiving unemployment compensation. 

Here’s a sample of the allowable medical expenses that can be paid with HSA funds:

• Acupuncture
• Braces
• Childbirth classes
• Chiropractors
• Dental fees
• Doctor’s fees
• Drugs – prescription and over-the-counter
• Eyeglasses and eye examination fees
• Laser eye surgery
• Medicare parts A and B
• Psychiatric care
• Special needs schools
• Therapy treatments prescribed by a physician
• Weight loss programs

The money in your HSA account is funded by you and belongs to you, not to an insurance company. It’s there when you need it for your health…or for your retirement. For more information, visit www.treas.gov. (Click on “Health Savings Accounts.”)

Cat Gautieri lives by the golden rule to provide insurance services. As an independent broker, she has all health products available in California, so she provides cost-effective solutions to individuals, families, seniors and small business owners as life changes occur. Learn more at www.mybenefits2.net.