Southeast Insurance Solutions, Inc.

Insuring Today for a Healthier Tomorrow

Health Savings Accounts

What is a Health Savings Account (HSA)?

• A Health Savings Account (HSA) is similar to an IRA in that it is a tax deductible savings account that is linked with a High Deductible Health Plan (HDHP).  Your deposits into your HSA are tax deductible, your savings grow tax defered and can be withdrawn tax free to help pay your medical insurance deductible or other qualified medical expenses like vision, prescriptions, and dental.
• HSA contributions and interest earned carryover from year to year allowing you to build up your savings over time.  You will never lose your savings or pay taxes as long as your HSA funds are used to pay for qualified medical expenses.  If you elect to cancel your HDHP then you can no longer make contributions to your HSA, but you can continue to spend your savings on qualified medical expenses.
• To set up an HSA you must have a High Deductible Health Plan (HDHP).  For 2009, the minimum deductible allowed by The Treasury Department is $1,150 for individual coverage and $2,300 for family coverage.  The maximum out of pocket allowed on a HDHP is $5,800 for individual coverage and $11,600 for family coverage.
• Similar to an IRA, there are maximum contributions that can be made to you HSA.  For 2009, the maximum annual contribution for individual coverage is $3,000 and for families the maximum annual contribution is $5,950.  However, if you are 55 or older, you can make an additional $1,000 "catch up" contribution annually.

How does an HSA plan compare to a traditional copay plan?

Example:  Male-43, Female-42, Son-10, Daughter-8.  Charlotte, NC residence with no health conditions.

Plan Details	Family Copay Plan	Family HSA Plan
Deductible	$1,000 (up to 3/family)	$5,450 (1/family)
Coinsurance	80%	100%
Office Copay	$15 Primary   $30 Specialists	100% after deductible
Prescriptions	$10 Generic $35 Brand	100% after deductible
Preventive Care	$15 Copay	100%
Vision (Routine Eye Care)	$15 Copay	N/A
Hospital Care	Deductible and Coinsurance	100% after deductible
Lifetime Maximum Benefit	Unlimited	Unlimited
Montthly Premium	$915	$525
Total Annual Premium	$10,980	$6,300
Tax Savings with $4K Deposit into HSA (25% Fed, 7.5% FICA, 5% State)	N/A	$1,500
Average Net Monthly Premium	$915	$400
Percent Savings with HSA and Tax Savings	N/A	56.3%

Example Scenario...Lets see how the plan works

Let's take a look at how the HSA stacks up against the other plan in the event of a catastrophic claim.  Let's say the 43 year old male suffers a torn ligament in his knee while playing basketball in the local rec. league.  In his current plan, he would probably go to the emergency room for initial treatment. At the E.R. they would take preliminary x-rays and probably provide a temporary brace.  The doctor at the E.R. would then advise him that he probably would need surgery but that he should see his current physician to set it up. His physician concurs with the E.R. physician and schedules him for the surgery the next day.  After surgery, he would then have to go to physical therapy three times a week for the next six weeks.  In addition, he would be prescribed a 30 day supply of anti-inflammatory medication.

This illustration was meant to show what a single person's liability would be in a worst case scenario.  In their current plan, this family is paying the insurance company $10,980 annually for the opportunity to spend another $2,718 in deductible, coinsurance and copays on only one person.  The family would still be liable for up to $3,000 in additional deductible and coinsurance expenses (plus any copays) if another family member needed medical attention. 

In the HSA, they would pay the insurance company $6,300 annually for the opportunity to spend $5,540 in total for all family members.  The HSA is simply a more cost efficient means of financing annual healthcare expenses.

Your HSA savings can be used to pay for qualified expenses including services not covered by your HDHP.

• Dental treatment including braces and dentures.
• Vision care including eyeware, contact lenses and cleaning solutions.  LASIK eye surgery.
• Chiropractic Care and  Accupuncture.
• Long Term Care Premiums (certain limits apply) and Medicare premiums and deductibles.
• Some over the counter medicine, including antacids, pain relivers, cold medicine and others.
• For a complete list see Publication 502 from the IRS.