An Ohio Health Savings Account (HSA) is one of the great values when purchasing private, Exchange, or Group medical coverage. It is a low-cost savings product that offers a different way to cover your healthcare expenses, and they are approved for the State Marketplace. HSAs enable you to pay for current costs, and save for future approved medical and retiree bills, while reducing your tax liability. A Senior Medicare option (Plan F HD) is also offered.
These types of policies (private and employer-provided) are offered by many large carriers, including Anthem BCBS, UnitedHealthcare, Medical Mutual, CareSource, SummaCare, Paramount, Aetna, and Oscar. Currently, they are not offered by Ambetter and Molina. We shop, research and compare all of the available plans. Considered one of the best medical plans in Ohio for persons wanting a high deductible, you can also reduce your premium with a federal subsidy if you meet household income requirements.
The maximum allowable contribution each year is $3,550 for an individual, and $7,100 for a family. The underlying HDHP (see below for definition) plan must have a minimum deductible of $1,400 for single coverage, and $2,800 for family coverage. The maximum allowed out-of-pocket expenses are $6,900 and $13,800 respectively.
A $1,000 "catch-up" contribution is allowed for contract owners that have reached age 55. The average contribution that employers make to their employee's HSA plans is about $700. Annual contribution limits are indexed for inflation, although the cost of medical expenses (under age-65 and Seniors) generally increases faster.
NOTE: These types of policies are always issued in one person's name only, regardless of your marital status, or the number of persons in the household. Also, premiums for the HDHP (see below) coverage can not be paid from the savings portion. You can choose to have a different HDHP plan each year. Unlike an FSA, money not spent during the year is not lost.
An HDHP Is Required
You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of an HSA. An HDHP generally costs less than a typical policy, so the money that you save on insurance, can therefore be deposited into the Health Savings Account. You can also have an HDHP policy without the savings portion.This concept is a popular option if you prefer to have one of the cheapest plans, but still utilize large network-negotiated discounts for your larger medical expenses.
These "discounts" are often quite substantial, which justifies selecting a much more cost-effective higher deductible. For example, the cost of an MRI may reduce from $1,400 to $800, the cost of a diagnostic lab test or x-ray from $100 to $30, and the cost of a routine office visit from $85 to $60. Specialist visits, physical therapy, and inpatient and outpatient hospital visits also receive large cost reductions.
If you create the "side account," your accumlated funds can potentially increase, and there are many high-deductible options to choose from.You must adhere to federal limits, which may change each year. You may choose more aggressive equity funds, or elect a fixed-interest option. Although extremely safe, the fixed-interest option generally earns a rate-of-return between .5% and 1.5%. However, it is possible that rates could increase.
Through tax deductions, the government is actually assisting you when you buy the policy. You receive a deduction for any deposits that are made, even if you don't spend the money that year. And you are not required to itemize your deductions to reap the benefits. Since you own and manage the account, you can freely deposit (subject to IRS maximums) and withdraw funds at any time. Typically, if you withdraw money, without paying for a qualified medical, dental, or vision expense, you will have to forfeit the tax deduction.
Once you become eligible for Medicare (age 65), any unused funds can be withdrawn without any penalty. However, to retain the tax-deduction, the funds must be used for qualified medical expenses. Non-medical expense withdraws will be taxed as ordinary income. For example, you are allowed to pay for Medicare Parts A, B, and D, along with HMO premiums.
However, the cost of Medicare Supplement and Advantage plans is not tax-deductible. We have devoted comprehensive content in our website to help you review and compare Senior plan options. Additional tax-related information is found here, which is the official IRS web link. NOTE: If funds are withdrawn to pay for non-qualified expenses, the total amount becomes taxable and an additional 20% tax penalty is applied. Also, IRS form 8889 should be filed when you prepare your federal tax return.
You Control Funds In The Account
You are the sole owner of the money in your account. Decisions on how or when to spend the money are made by you, without depending on an unrelated party or a separate company. You can also decide what types of investments to make with the money in the account in order to make it grow. The "fixed interest rate" option (previously mentioned) is the most conservative and most popular, and eliminates most risk to your money. Although you are forfeiting potential growth, safety of principal is not an issue.
And since an HSA is portable, the policy remains in effect regardless of where you work or which carrier issued the contract. You can change employers or become self-employed and still keep your plan. If you terminate your policy, you can purchase a new plan during Ohio Open Enrollment each year. NOTE: An HDHP must always be maintained to take advantage of tax benefits. For example, if you change to a non-compliant short-term plan, let your policy lapse, or enroll in a non-HSA Group plan, no tax deduction can be taken.
Accumulated Funds Pay Medical, Dental, And Vision Expenses
Funds can pay for any “qualified medical expense”, even if the expense is not covered by your HDHP. For example, most individual and family medical policies do not cover all of the cost of some office visits, but HSAs can. If the money from the account is used for qualified medical expenses, then the money spent is tax-free. You can also use your funds to purchase qualified dental and vision expenses, including glasses, vision and dental exams.
Once funds are deposited, the account can be used to pay for approved expenses tax-free, even if you no longer have HDHP coverage. The funds roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.
Preventive benefits are also covered at 100% with no waiting period. Some common covered preventive benefits are routine annual physicals, child immunizations, OBGYN visits, paps and mammograms. A debit card is issued by the bank that you choose, which helps simplify your record-keeping, and you receive a statement each month. you can also view your account transactions online.
All plans also include "Essential Health Benefits" which are mandatory under the "Affordable Care Act" legislation. These are the 10 required components of your healthcare plan that form the foundation of the policy. Maternity, ER coverage, office visits, prescription drugs, and hospital expenses (inpatient and outpatient) are common benefits.
Although a deductible applies to most non-preventative coverage, once that deductible and maximum out-of-pocket expense limit is reached, typically, there are no major differences when comparing to more expensive comprehensive plan options. Since maximum caps were removed several years ago, unlimited benefits are available for covered major medical claims.
HSA Plans Through Employers
It is likely that your employer will offer a high-deductible HSA option. Premiums will be substantially less than comprehsive PPO or HMO options, and larger companies may make an annual deposit into your account. Employee deposits are not taxable, and payroll-deduction (before taxes) contributions are often available. After-tax contributions may be able to be deucted when the federal tax return is filed.
A flexible spending ccount (FSA) may also be available to company workers, if it is considered "limited use." Typically, only dental and vision expenses qualify for the deduction. During the FSA grace period (if applicable), deposits can not be made. Amounts can vary by amount and frequency. Employers can save on FICA taxes by making tax-deductible contributions. On-site clinics have become very popular. But if the employer is paying a portion of the treatment, the policy deductible must be met.
Adult Children Coverage
Dependents for Health Savings Accounts must be under the age of 24 to have their medical expenses considered deductible, even though age 26 is the limit for other ACA plans. Although they are free to remain on the policy until age 26, no tax benefit can be taken. Also, children covered under the policy, must be taken as a deduction on the parent's tax return. If the dependents file their own individual return, once again, a deduction can not be taken.
A popular option for recent healthy college graduates and young adults is this type of policy. Premiums are generally low, preventative expenses are fully-covered, and out-of-pocket dental and vision expenses that are often not covered on an employer-provided Group plan, can be paid with tax-deductible dollars. Accumulated funds can grow to help offset future deductibles. If benefits are provided by an employer, remaining accumulated funds will not be lost.
With each Presidential election, reducing healthcare costs is always a contentious topic that is constantly discussed. Whether Obamacare remains a fixture, or is possibly tweaked or replaced, HSA plans continue to be recognized as one of the few remaining affordable options, that continue to provide quality medical benefits. They aren't going away!
I have an HSA for myself and my family. It has performed very well, and we have substantially reduced our health insurance expenses. Fortunately, we have only approached our deductible one time in the last 10 years. Therefore, in most years, we have been able to roll over unused funds from that year to the following year. And since it is a "grandfathered" plan, we can keep our coverage instead of applying for a new policy. .