An HSA refers to health insurance policies with deductibles higher than traditional policies. HSAs generally have lower premiums and higher deductibles than regular Health Insurance Plans.
An HSA can be an HMO, a PPO, POS, EPO, or other type of insurance plan. However, not all policies with high deductibles make individuals eligible to contribute to an HSA. In order for a high deductible policy to be an HSA, the policy must meet certain requirements relating to deductibles, out-of-pocket expenses, covered benefits, and preventive care.
To qualify as an HSA, the policy must have an annual deductible that is at least $1,200 for self-only coverage or $2,400 for family coverage beginning in 2011.
The HSA can have an annual deductible as high as $5,950 for self-only coverage or $11,900 for family coverage in 2011. If a high deductible policy has an annual deductible below or above these amounts beginning in 2011, it is not an HSA-qualified policy.
In addition to the premium, employees may contribute money to an HSA. The amount that may be deposited into an HSA account each year is set by the U.S. Treasury Department using a formula specified in law. For 2011, the amount you may deposit is limited to:
• $3,050 for individuals with self-only coverage
• $6,150 for those with family coverage
In 2012 maximum annual amount that can be contributed to an HSA will be $3,100 for an individual, up $50 from $3,050 in 2011. The 2012 maximum annual amount that can be contributed to an HSA is $6,250 for families, up $100 from $6,150 in 2011.
Individuals age 55 or older may make additional “catch-up” contributions each year. The maximum “catch-up” contribution for 2011 and 2012 is $1,000.
The money that employees can contribute to an HSA can be invested in stocks, bond, mutual funds, or money markets. At age 65 the money can be withdrawn tax-free for medical expenses. If you want the money to go on vacation, you will have to pay income taxes on the money to withdraw.
Listen to the HSA interview
