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How HSA Insurance Plans Work
Basic concept. An HSA plan is a combination of 2 specific things:
- An IRS-approved high deductible health plan (HDHP), and
- A special tax-sheltered savings account
First step - Get a Qualified High Deductible Plan.
You can purchase an HDHP insurance plan from most major insurance companies. You must be careful, however, because not just any so-called "high deductible" health plan will qualify for an HSA under IRS rules. TIP: If you already have a high deductible plan but do not have an HSA savings account, chances are your current health plan is not HSA-qualified, in which case you will need to purchase a new, properly qualified high deductible plan.
Our insurance agency specializes in HDHP plans that are HSA-qualified. We provide you with direct-to-carrier rates, which are the lowest rates available, period. There is no charge for our service - all we ask is that you allow us the privilege of serving as your "agent of record" (which is what entitles us to compensatio from the insurers - again, at no cost to you). So you can knock yourself crazy getting quotes from 4 or 5 different sources, then try to navigate through the jungle of quotes and plan designs, or you could take the shortcut and just let us get the quotes on your behalf and help you work through them to identify the best plan for you and your family.
Click here to learn more about IRS guidelines for HSA-qualified high deductible plans
Special note about getting a new high-deductible plan issued: Until guaranteed acceptance under Obamacare kicks in in 2014, you must be insurable in order to get a new high deductible plan issued. See more details at the bottom of this page.
Next Step - Open the HSA Account.
After you have an HSA-qualified HDHP in place, then you are eligible to establish the actual savings account at the financial institution of your choice. We recommend that you keep your account separate from the insurance company in most situations.
Setting up the HSA account is exactly like setting up an IRA account. In fact, the HSA account functions in a manner remarkably similar to the traditional IRA.
Just like an IRA, the HSA has some huge tax advantages. For example, every dollar you deposit into your savings account is fully deductible on your federal tax return, regardless of whether you itemize. Thus, every dollar going into the account is a tax-free dollar.
You can take the money back out on a tax-free basis to pay for a litany of approved medical expenses (this is way better than an IRA can do). For example, you can pay for virtually anything covered under your deductible on your HDHP like Rx drugs, routine doctor's visits, etc. In addition, you can pay for a lot of things that are not covered under the insurance policy, such as dental, vision, even accupuncture.
Click here to see a list of IRS-approved expenses
What's the catch?
Well, the main catch is that there are limits on how much you can contribute to your account each tax year. Otherwise, people would abuse the privilege (that's what Congress thinks). And you have to play by the rules. For example, if you take money out of your HSA account for a down payment on a ski boat, there will be a penalty imposed for that transaction. Use the account strictly for medical expenses, and you'll be the envy of your friends.
Click here to learn more about annual contribution limits, etc.
The other catch, as referenced above, is that you must be insurable to get a new high deductible health plan issued, at least on an individual (non-employer-group) basis. Being in good health is not necessarily the same thing as being insurable (but it's a good start). If you have any questions about your insurability, my suggestion is to check first with a duly licensed and experienced health insurance broker (like me). It is absolutely a waste of time to spend 16 hours rummaging through all of these details trying to figure out whethe this is a "good deal" only to get declined by an insurance company after you apply. I don't want that to happen to you - or me. So please feel free to pick up the phone and call me at the number listed at the top of this page.
What to do first?
Easy. Get some quotes. None of these details matter much if you think the premiums are not low enough, or if you are not insurable. Use our easy form - it only takes about 3 minutes.