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Health Savings Accounts 101 for families

New health insurance plans offered by many employers come with a high deductible but a lower premium. And if you’ve got a high deductible, you are probably eligible to use a tax-preferred Health Savings Account, which could help you accumulate a healthy stash of cash for medical expenses later in life.

The details

  • Minimum deductible to qualify to have an HSA: ,200 for
    individuals; ,500 for a family.
  • Maximum out-of-pocket (for deductibles and co-pays, not
    premiums): ,250 for individuals; ,500 for a family.
  • Maximum contribution: ,250 for an individual and ,450 for a
    family. (Slightly higher if you are over 55.)
  • Contributions are typically set up though a payroll
    deduction.
  • Contributions also can be made by depositing funds directly
    into the account.
  • After-tax contributions qualify as a deduction whether or not
    the taxpayer itemizes or takes the standard deduction.

HSAs are personal financial accounts used to pay for medical, dental, vision and prescription expenses with pre-tax dollars. This saves payroll and income taxes up front. Over time, earnings on the money in an HSA grow tax free, just like a 401(k).

Some high-deductible plans require the consumer to pay everything up to the deductible. Others cover preventative benefits, like well-child, annual adult exams and cancer screenings, with no out-of-pocket payments. Large expenses, such as lengthy hospital stays or specialized treatment, are still covered. And because you pay more of your own costs, the premium is lower.

Inside an HSA, those savings can grow to pay for medical expenses in the future or to supplement retirement funding.

An HSA is yours regardless of a change of employer. If you want to get the most from your HSA, you can contribute the maximum allowed each year. There is no “use it or lose it” rule for HSAs, so contributions not withdrawn may be rolled over. If you switch to a lower deductible insurance plan, the money still is yours and continues to grow tax-free. The entire balance can be withdrawn at age 65 without penalty.

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