Health savings account (HSA) plans have become very popular because consumers are able to combine the tax deductibility traits of an Individual Retirement Account (IRA) with a high deductible health insurance plan. However, Texas consumers should identify the differences between HSA plans and traditional plans to understand how the coverage meets the individual’s or the family’s health insurance coverage requirements.
HSA coverage evolved from the Archer Medical Savings Account (MSA) plans introduced in 1996. Archer MSA plans were limited to only individuals that were self-employed and included other restrictions regarding contribution limits. Current HSA plans replaced Archer MSA plans in 2003. In 2007, there were major changes made to HSA plans, which reduced the contribution limits tied to the plan deductible and eliminated contribution pro-ration. An addition change allowed a transfer between an existing IRA and an HSA.
The major difference between HSA plans and traditional non-HSA plans is the ability to make tax-deductible contributions to a tax-favored savings account. Consumers do not have the option of establishing an account tied to their non-HSA health insurance plan that offers tax deductibility benefits. HSA plans allow the consumer to establish a tax-favored account that reduces the policyholder’s taxable income for each dollar deposited into the tax-favored account. The funds in the tax-favored account can be withdrawn without tax or penalty if the funds are used for medical expenses. The list of medical expenses approved by the IRS is available at Health Savings Account Eligible Expenses.
Family HSA plans handle the plan deductible differently from non-HSA plans. HSA plans have one family deductible that applies in total to all members of a covered family. For example, all members of the family will share a $5,000 deductible for a family of four. If one member of the family incurs $5,000 in covered medical expenses, then the plan deductible has been met for the remaining members of the family. If three members of the family each incur $1,500 in covered medical expenses and the fourth family member incurs $500, then the family deductible has been met. Non-HSA plan deductibles are very different. The plan deductible can apply to either two members or three members of the family depending on the plan. If the plan deductible is $2,500, each member of the family has a $2,500 deductible, and covered medical expenses apply only to the deductible for that family member. If any one of the family members reaches $2,500 in claims, each additional claim dollar for that insured member would be subject to the policy’s coinsurance rate.
HSA plans also address prescription benefits differently than non-HSA plans. HSA policies apply covered expenses, both medical and prescriptions, to the plan deductible. Medical expenses incurred from hospital, physician, laboratory, x-ray or prescription services can satisfy the plan deductible, but the prescription co-pay will be dependent on meeting the plan deductible. If a family is covered by an HSA plan with a $5,000 deductible, the prescription co-pay will not apply until the full family deductible is satisfied. With non-HSA plans, the prescription benefit will typically have a separate deductible, which is much lower than the plan deductible. The prescription deductible will vary from $200 to up to $1,000, but it will be totally separate from the plan deductible. Only prescription benefits will apply to the separate prescription deductible.
HSA plans have become very popular because they offer a lower premium than similar non-HSA plans and provide a tax-favored account that can increase significantly over time with annual contributions. Texas consumers should evaluate the differences previously outlined to ensure that the HSA plan will provide the benefits according to the policyholder’s requirements.
Stateside Insurance Services, since 2003, has focused on providing comprehensive health insurance information, responsive customer service and expert industry knowledge for Texas consumers. Stateside has annually been recognized by health insurance carriers and the Health Insurance Marketplace as a Top Producer in Texas.
Whether the health insurance policy is for an individual, family, small business or supplemental Medicare coverage, Stateside dedicates the time, and our deep industry expertise, to ensure our clients have identified the best health insurance plan for their specific needs.
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