Understanding HSA Accounts
We're so glad you asked. Making use of these tax deferred funds is the best thing we can do. But how exactly do they work?
Is it worth "giving up coverage"? Or am I giving up any coverage at all?
The first thing to remember is that the health insurance plan you select must be HSA Compatible, which only means that the plan you select must be a "high deductible health plan" HDHP for short. But nothing could be further from the truth. The Bronze HSA Plan currently has a $6,650 out of pocket maximum, while the Silver and Gold are $7,550 and $7,200. Since neither the Silver or Gold is HSA compatible, which means no tax credits.
Let's add it up and see what makes sense. Our client was 63 whose cobra coverage was running out. His choices were the Blue Shield Bronze HSA for $840 per month, and the Silver 70 PPO for over $1,100 per month. Over $3,000 a year difference and our worst case scenario is higher by an additional $900 of out of pocket maximum, and no tax advantage.
Remember that today's Affordable Care Act Compliant Plans will include the 10 essential benefits. That being said even the lowest cost plan will include every coverage that the "better plans" do, and at a much lower amount.
Now that we've selected an HSA Compatible insurance plan, let's understand just how the tax credit works. You'll need to open a Health Savings Account
Check with your financial institution(s) to see if they offer HSA accounts (if they do not, we recommend the following:(www.thriventfcu.com). Deposit what you might expect to use in medical bills over the course of a year. Note that the funds roll over year to year. Check with your accountant about what your limits are.
So you've opened the health savings account and deposited funds, but now what? Simply inform your accountant how much you've deposited in the account for that tax year, and they'll adjust your taxable income accordingly. It's that simple.
Obtain a debit card from this account, and keep it with to your health insurance ID card as a reminder to always use it.
Use the funds for dental, vision, pharmacy, as well as doctor and hospital visits, labs and xrays.
Ask for discounts with your provider, you may do better as a cash patient.
Use goodrx.com and check with the drug manufacturer for discounts, should the need arise.
Most importantly, consider us your teammate in managing costs, Call on us anytime. 800 860 8835 Hayek Insurance, 03/23/2019