How can a Health Savings Account get me lower premiums and  Tax Advantages?

Health Savings Accounts (HSA’s) IRC 223 * allow you to save money, premium & Federal taxes but apparently not CA taxes, by getting a qualified Bronze  high-deductible health Insurance  plan (HDHP).  High deductible Bronze plans have lower premiums than say Silver, Bronze or Platinum.  See button below for a proposal.   Premiums vs co pays, deductibles etc, are a function of the MLR Medical Loss Ratio, where Insurance Companies are mandated to pay 80c and 85c of every dollar in premium in claims or pay rebates.  So, if you don’t think you’ll have tons of low end claims, an HSA might be the thing for you.

You can put in – deposit any amount at any time, up to the contribution limits.  You don’t have to put in deposits if you don’t feel like it.  Best of all, you can put in a deposit, just before you pay any part of your  deductible.

The contribution to your HSA is tax deductible, lowers your Adjusted Gross Income on line 25 of 1040 with Form 8889 attached. 

You can withdraw from your HSA tax free  any   allowable medical  expenses (IRS Publication 502, Internal Revenue Code (IRC) §213 [d])) Aetna even some Health Insurance Premiums through your HSA bank account – debit card.  The maximum contributions Wells Fargo  * IRSSHRM * are in the  table below. If you are over age 55 an additional $1k can be deposited.  An HSA is very similar to an IRA, except that it is for medical expenses.

When you retire, the money in your account can still be used for medical and some Insurance Premiums, without paying taxes.

Without an HSA or having an EmployER sponsored planmedical expenses are not usually deductible unless they are more that 10% PPACA 9013 of adjusted gross income IRS Publication 969 .PDF  California tax* IRS publication 502

One might also consider a supplemental accident plan to cover the deductible in a Bronze HSA Plan.

ACA Health Reform does not appear to have any effect on HSA’s other than the change from 7.5% to 10% that one would have to otherwise incur for premiums and expenses to be deductible and over the counter medications must have a prescription. PPACA 9013 healthcareexchange.com cigna.com hsawells fargo While there is a $2k deductible limit for individuals and $4k for families, to qualify as an essential benefit, since the HSA account provides reimbursement, 42 USC 18022 (2) there should be no problem.  Check with your tax or legal adviser.

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#Contribution and Out-of-Pocket Limits
for Health Savings Accounts and High-Deductible Health Plans
   2021 2020 2019  
HSA contribution limit (employer + employee) $3,600 Individual

 

$7,200 Family

Self-only: $3,550
Family: $7,100
Self-only: $3,500
Family: $7,000
 
HSA catch-up contributions (age 55 or older) Same $1,000 $1,000  
HDHP minimum deductibles Same Self-only: $1,400
Family: $2,800
Self-only: $1,350
Family: $2,700
 
HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, but not premiums)
  • $7,000 Individual
  • $14,000 Family
Self-only: $6,900
Family: $13,800
Self-only: $6,750
Family: $13,500
 
Source: IRS, Revenue Procedure 2019-25. *  SHRM.org  *

Is your Family Protected with Life Insurance? Click here for Instant Quote

Is your Family Protected with Life Insurance? Click here for Instant Quote

Consumer Resources

IRS Notice 2020-15 allows HSA’s to cover Corona Virus testing as Preventative.  Connect Your Care.com

Los Angeles Times 5.6.2013 on High Deductible Plans and HSA’s

LA Times 5.2013 on Pros – Cons of High Deductible Plans  la times.com

Internal Revenue Bulletin: 2008-29  Health Savings Accounts – Guidance

Our webpage on OOP Out of Pocket Maximum, Deductibles & Co Pays

Kaiser 

Treatment Cost Estimator Tool

The tool is for all Kaiser Members that are enrolled on Deductible or  Health Savings Account Plans.  The cost estimates are for services that are marked "after deductible" to give members an idea of the cost of  those services.

Kaiser Estimates Tool

How Premiums and Deductibles Work
VIDEO
 

how premiums & deductibles work video

What’s this about embedded & aggregate deductibles?

Individual vs Family Deductibles?

Under family coverage, an embedded deductible is the individual deductible for each covered person, embedded in the family deductible. While it might not sound like a good thing to have two deductibles, it actually works to provide better coverage for individual members because once each family member meets his or her embedded deductible, health insurance begins paying for covered services, regardless of whether the larger family deductible is met.

Contrast this to a non-embedded deductible, also referred to as an aggregate deductible. Under an aggregate deductible, the total family deductible must be paid out-of-pocket before health insurance starts paying for the health care services incurred by any family member. While family coverage with an aggregate deductible may have a lower monthly premium, coverage won’t kick in until the total family deductible is met. In contrast, family health plans with an embedded deductible may help ensure that there is coverage for individual family members once they meet their embedded deductible, regardless of whether the family deductible is met. Unfortunately, the Summary of Benefits and Coverage won’t necessarily tell you if the deductible is embedded or not; you may have to call the plan to learn how the deductible will be applied for your coverage.   Learn More⇒ Center on Health Insurance Reforms   AB 1305

If two or more on a policy it’s the Family Deductible NOT individual, with a family max?

See excerpt of Blue Cross Bronze HSA Page 55 on Family or Individual Deductible

NEW for 2016!!!  Embedded – HSA plans had an aggregate deductible where one person could meet the entire family deductible.   Now a family member will not be charge more than the individual deductible and be able to receive benefits sooner.  BC RSM Email 9.29.2015    SHRM.org   AB 1305 2015 Bonta

2017 NEW Laws & Regulations effective 1.1.2017  AB 1305, 339 & 1954  SB 999 – Deductible & OOP Maximums FAQ’s

What is the Maximum that can be contributed to an HSA – Health Savings Account?

35 comments on “HSA Health Savings Accounts

    • Yes???, however the rules get technical and you really need to check with your CPA for your specific situation. In my own case, I didn’t think they were as that’s what my own CPA said for MY situation, as I can deduct premiums as a business expense.

      Paying for some insurance premiums

      (IRC Sec. 223(d)(2)(C); IRS Notice 2004-2 Q&A 27; IRS Notice 2005-59 Q&A 29) Generally, you cannot use your HSA to pay medical insurance premiums, but there are some exceptions.

      Medicare premiums

      Once you are 65 and eligible for Medicare, you can use your HSA to pay Medicare premiums (A, B, C, and D), out-of-pocket expenses that Medicare does not pay, and Medicare HMO premiums.

      You cannot pay Medigap premiums with your HSA. Medigap is insurance that individuals can buy to cover out-of-pocket costs that are not covered by Medicare.

      Premiums for employer-based coverage after age 65

      If you are 65 or older and still work, you can pay your share of premiums for employer-based coverage out of your HSA (you cannot pay for these premiums before age 65).

      If you are 65 or older and do not work, you can pay your share of any premiums your employer requires you to pay from your HSA for employer-sponsored retiree healthcare coverage.

      Premiums when you are unemployed

      You can pay for healthcare coverage while receiving unemployment compensation under federal or state law.

      You can also pay COBRA premiums with HSA dollars if you are eligible for COBRA benefits.

      Long-term care insurance

      You may use your HSA to pay premiums for qualified long-term care insurance. To be qualified, a long-term care insurance plan must meet criteria determined by federal law (see IRS Publication 969). guidebook on HSA page 73

      Here’s a cut & paste from IRS Publication 502

      Insurance Premiums

      However, in publication 502 they are qualified Medical & Dental Expenses

      You can include in medical expenses insurance premiums you pay for policies that cover medical care. You can’t include in medical expenses insurance premiums that were paid and for which you are claiming a credit or deduction. Medical care policies can provide payment for treatment that includes:

      Hospitalization, surgical services, X-rays;
      Prescription drugs and insulin;
      Dental care
      ;
      Replacement of lost or damaged contact lenses; and
      Long-term care (subject to additional limitations).

      Does your employer pay your premiums?

      Medicare B

      Medicare B Out patient & doctor visits is a supplemental medical insurance. Premiums you pay for Medicare B are a medical expense.

      Medicare D Rx Prescriptions

      Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. You can include as a medical expense premiums you pay for Medicare D.

  1. Blue Shield Bronze 60 HDHP says both Deductible and Max Out of Pocket are $7000.

    If we use up Deductible, we don’t need to pay any more?

    Am I correct?

    If so, how can I use HSA to save tax?

  2. This is a comment from a web page that we consolidated into this one

    Are Employer contributions to HSA
    for adult dependents spouses or children under age 26
    who filing their own tax returns deductible?

    Q-26. Are employer contributions to the HSA of an employee’s spouse (who is not an employee of this employer) excluded from the employee’s gross income and wages?

    A-26. No. The exclusion under §106(d)(1) is limited to contributions by an employer to the HSA of an employee who is an eligible individual. Any contribution by an employer to the HSA of a non-employee (e.g., a spouse of an employee or any other individual), including salary reduction amounts made through a § 125 cafeteria plan, must be included in the gross income and wages of the employee. Notice 2008-59, 2008-29 I.R.B. 123, questions 23 through 27

    Ginger asks on

    I am employer that funds a HDHP [High Deductible Health Plan] and HSA’s [Health Savings Accounts] for all employees.

    Have employee with an adult child who can no longer be considered a dependent.

    Adult child needs to open her own HSA but is still covered on HDHP for two more years.

    Can employer contribute to adult child’s HSA? If so, are there any tax advantages?

    As the employer, I have employee that has an adult child who needs to set up her own HSA account because she graduated college and got married. Adult child is covered on parent’s HDHP funded by my company. Can employer contribute to adult child’s account? If so, does employer receive any tax advantage?

    I have been all over the internet for two days about this. Yes adult child is 23, graduated college, married and is living on her own. I understand she can not file a joint tax return in order to remain eligible to fund the HSA. I am not able to find information on whether the employer can fund adult child’s HSA if covered under the employer’s HDHP.

    Research

    Qualifying for an HSA

    To be an eligible individual and qualify for an HSA, you must meet the following requirements.
    You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
    You have no other health coverage except what is permitted under Other health coverage, later.
    You are not enrolled in Medicare.
    You cannot be claimed as a dependent on someone else’s tax return. IRS Publication 969 Page 3

    High deductible health plan (HDHP).

    An HDHP has:
    The following table shows the minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2014.

    Self-only coverage Family coverage
    Minimum annual deductible $1,250 $2,500
    Maximum annual deductible and
    other out-of-pocket expenses* $6,350 $12,700
    * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies.
    IRS Publication 969 Page 3

    Employer Contributions

    You can make contributions to your employees’ HSAs.

    Does this mean employee’s HSA, but not dependents?

    You deduct the contributions on your business income tax return for the year in which you make the contributions. If the contribution is allocated to the prior year, you still deduct it in the year in which you made the contribution. IRS # 969

    Links & Resources

    Internal Revenue Bulletin: 2008-29 Health Savings Accounts – Guidance

    • No permission or authorization from the IRS is necessary to establish an HSA. You set up an HSA with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider.

      you have to report the distribution on Form 8889.
      https://www.irs.gov/pub/irs-pdf/p969.pdf

      See the HSA Guidebook above

      Namely

      : Taxes, paperwork and recordkeeping . . . . 125

  3. If my Insurance Company refuses to pay a claim, stating it wasn’t medically necessary, out of network or a Rx not in the formulary, can I pay it out of my HSA?

    • It looks that way. Please note we are not attorney’s or CPA’s.

      What Are Medical Expenses?

      Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.

      Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness. They don’t include expenses that are merely beneficial to general health, such as vitamins or a vacation. https://www.irs.gov/publications/p502#en_US_2018_publink1000178851

      More detail https://www.irs.gov/taxtopics/tc502

      (2)Qualified medical expenses

      (A)In general

      The term “qualified medical expenses” means, with respect to an account beneficiary, amounts paid by such beneficiary for medical care (as defined in section 213(d))

      (d)Definitions For purposes of this section—
      (1)The term “medical care” means amounts paid—
      (A)for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,
      (B)for transportation primarily for and essential to medical care referred to in subparagraph (A), https://www.law.cornell.edu/uscode/text/26/213

      for such individual, the spouse of such individual, and any dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual, but only to the extent such amounts are not compensated for by insurance or otherwise. Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin. https://www.law.cornell.edu/uscode/text/26/223

      Our webpage on Medical Necessity

      ISSUE
      Are amounts paid by individuals for breast reconstruction surgery, vision
      correction surgery, and teeth whitening medical care expenses within the meaning of
      § 213(d) and deductible under § 213 of the Internal Revenue Code?

      FACTS
      Taxpayer A undergoes mastectomy surgery that removes a breast as part of
      treatment for cancer and pays a surgeon to reconstruct the breast. Taxpayer B wears
      glasses to correct myopia and pays a doctor to perform laser eye surgery to correct the
      myopia. Taxpayer C’s teeth are discolored as a result of age. C pays a dentist to
      perform a teeth-whitening procedure. A, B, and C are not compensated for their
      expenses by insurance or otherwise.

      HOLDING
      Amounts paid by individuals for breast reconstruction surgery following a
      mastectomy for cancer and for vision correction surgery are medical care expenses
      under § 213(d) and are deductible under § 213 (subject to the limitations of that
      section). Amounts paid by individuals to whiten teeth discolored as a result of age are
      not medical care expenses under § 213(d) and are not deductible.

      https://www.irs.gov/pub/irs-drop/rr-03-57.pdf

  4. I have an HSA with Oscar. What’s the about Oscar no longer doing HSA, as they have Free Tele Med doctor visits? Where else can I get an HDHP policy so that I can contribute to my HSA?

    • Here’s an excerpt of the email we got from Oscar about their no longer offering HSA, so that they can offer Telehealth

      We are discontinuing select plans in California because a new plan regulation requires that we remove HSA-compatibility in order to continue offering free Doctor on Call in 2020. We believe that the ability to offer free Doctor on Call is an important benefit that can save your clients both time and money. Last year, Oscar members saved an average of $129 each time they used Doctor on Call and saved over 106,000 hours in total travel time.

      Each of your clients has been mapped to a renewing plan that is nearly identical to their 2019 plan, except for HSA-compatibility. Please note that while your clients can no longer contribute funds to an HSA in 2020, they can still use any previously accumulated funds towards qualified medical expenses. Email dated Wed 10/16/2019 11:01 AM

      Sample member notification

      Click here to see what HDHP plans are available for you and the prices.

      SHRM on telemed & HSA problems & issues

      Doctor on call VIDEO

    • Let’s check out Publication 969

      To be an eligible individual and qualify for an HSA, you must meet the following requirements.

      • You are covered under a high deductible health plan (HDHP), described later, on the first day of the month.
      • You have no other health coverage except what is permitted under Other health coverage, later.
      • You aren’t enrolled in Medicare.
      • You can’t be claimed as a dependent on someone else’s 2018 tax return.

      Other health coverage. If you (and your spouse, if you have family coverage) have HDHP coverage, you generally can’t have any other health coverage. However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you aren’t covered by that plan.

      You can have additional insurance that provides benefits only for the following items.
      • Liabilities incurred under workers’ compensation laws, tort liabilities, or liabilities related to ownership or use of property.
      • A specific disease or illness.
      • A fixed amount per day (or other period) of hospitalization. You also can have coverage (whether provided through insurance or otherwise) for the following items.
      • Accidents.
      • Disability.

      (B)Certain coverage disregardedSubparagraph (A)(ii) shall be applied without regard to—

      (i)coverage for any benefit provided by permitted insurance,
      (ii)coverage (whether through insurance or otherwise) for accidents, disability, dental care, vision care, or long-term care, and
      https://www.law.cornell.edu/uscode/text/26/223

      Revenue Ruling 2004-38 Separate Rx Plan?

      So, it doesn’t look to me like you can. Please check with competent tax counsel and/or VITA. We aren’t permitted to give tax advice.

  5. Yes. Here’s our citations:

    you can contribute any amount to your HSA as long as it does not exceed your contribution limit. You have complete flexibility in determining how much to contribute. This can be the maximum allowable, $50 per month, or whatever works for you.

    The timing can be weekly, monthly, full amount at once, any amount at any time, HSA Edge.com

  6. I know that if your over 65 and on Medicare, you can’t contribute to an HSA. What about your spouse if she’s under 65 and you file jointly?

    • It’s possible that the plan you have meets the HSA qualifications, but I’m not an authorized CPA. As a licensed agent, I can only tell you that for a health plan to qualify for HSA it has to say HDHP on it. If I were to ask any Insurance Company if their plan qualifies, they would probably say the same thing. Even if the PPO Share plan qualifies, I doubt their legal department would let them tell you that. Thus, the plans that qualify say they are HDHP.

      To set up an HSA account, if you and your CPA believe your PPO Share Plan qualifies, just go to your own bank or one of these banks and set it up.

      The Tax Form 8889 requires that you certify your plan qualifies.

      Check the box to indicate your coverage under a high-deductible health plan (HDHP) during 2018 (see instructions)
      https://www.irs.gov/pub/irs-pdf/f8889.pdf

      High Deductible Health Plan
      An HDHP is a health plan that meets the following requirements.

      Self-only coverage Family coverage
      Minimum annual deductible $1,350 $2,700
      Maximum annual out-of-pocket expenses* $6,650 $13,300

      * This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Instead, only deductibles and out-of-pocket expenses (such as copayments and other amounts, but not premiums) for services within the network should be used to figure whether the limit is reached.

      An HDHP can provide preventive care and certain other benefits with no deductible or a deductible below the minimum annual deductible. For more details, see Pub. 969. An HDHP does not include a plan if substantially all of the coverage is for accidents, disability, dental care, vision care, or long-term care. See Other Health Coverage next.

  7. I have had California covered for the past three years and always end up having to pay back the subsidy due to my income

    I am self-employed in my income is somewhat variable and it’s hard to estimate what I’m going to make in the coming year.

    So would like to get health insurance with no subsidy something around $700 a month.

    • I’m not sure where you are getting the per person premium amount. It sounds like you are using the child premium only and not including yours and your husbands too. The screen shot above shows unsubsized outside of Covered CA using our free instant quote engine with subsidy calculation.

      Covered CA subsidies are available if your income is less than 400% of Federal Poverty Level – Income Chart or use our quote engine. Covered CA would pay advance subsidies, to be reconciled at tax time form 8962 which gets attached to your 1040. If you are not sure of your income, you can elect not to take subsidies and take them as a tax credit when you file your 2018 taxes.

      If you are getting subsidies due to low income, I doubt that a HSA would be much value as there wouldn’t be a lot of tax write off. I’m not a CPA or Attorney. Please read and review the above webpage and seek proper legal and tax counsel.

  8. There must be a better HSA plan. 40%!?

    Can you suggest an HSA plan with better coverage?

    It looks like the 2016 plan has $1000 more deductible and 10% higher co pay? Seems like poor coverage to me.

    Even if the premiums are higher we need to consider a better plan with lower deductible etc.

    Boy Obama care – should be called Give Me More Money for less Coverage Care

    • Let’s take a look at the detailed HSA United Health Care HSA $4,500/60% brochure from our FREE Almost Instant Small Group Quote Engine.

      1st off, if you are buying an HSA Health Savings Account it’s because one doesn’t think they are going to have much in the way of claims and you want to save premium $$$ by having a high deductible. The premium savings goes into your HSA account Tax Free and rolls over to the next year and even into retirement if you don’t use it.

      As we see from the online brochure, this plan has a $4,500 deductible and a Maximum Out of Pocket of $6,500 in network for individuals. Thus, the co-insurance amount of 40% only applies to $2,000 worth of claims between $6,500 and $4,500.

      I will send you quotes for alternate HSA plans in a private email. Please note the differences in networks as show on page 4 & 5 of the United Health Care brochure.

      All rates are based on an 80% loss ratio rule, so basically any premium one sends to an Insurance Company under ObamaCare, you get back 80% and the Insurance Company keeps 20% for overhead and profit. Why pay them to keep your money on small claims?

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