Health Savings Account (HSA)
A Health Savings Account (HSA) is a type of savings account like an IRA that lets you set aside money on a pre-tax basis to pay for qualified medical expenses.
By using untaxed dollars in a HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums.
While you can use the funds in an HSA at any time to pay for qualified medical expenses, you may contribute to an HSA only if you have a High Deductible Health Plan (HDHP) – generally a health insurance plan that only covers preventive services before the deductible.
For 2020, the minimum deductible for an HDHP is $1,400 for an individual and $2,800 for a family. When you view plans in the Marketplace, you can see if they’re “HSA-eligible.”
For 2020, if you have an HDHP, you can contribute up to $3,550 for self-only coverage and up to $7,100 for family coverage into an HSA. HSA funds roll over year to year if you don’t spend them. An HSA may earn interest or other earnings, which are not taxable.
Some health insurance companies offer HSAs for their HDHPs. Check with your company. You can also open an HSA through some banks and other financial institutions.
HSA & Medicare
IMPORTANT: When you enroll in Medicare Part A you can no longer contribute to your HSA.
The Good News!
Triple Tax Advantage of HSAs
- Your account contributions are pre-tax or tax-deductible.
- All earnings, interest, and, yes, investment returns are tax-free.
- Any withdrawals for qualified medical expenses are tax-free. Plus, once you reach age 65, all non-medical withdrawals are taxed at your current tax rate, just like a traditional IRA. (If you withdraw money for non-medical expenses before you’re 65, then there’s a 20% penalty.)
Should you delay enrolling Medicare?
Do you live in New Hampshire?
Medicare Savings Account (MSA) Plans
MSA plans also come with a bank account where Medicare deposits funds once each year for your medical expenses, which you can use to pay for your deductible.
- Your plan chooses the bank account and the amount it contributes.
- Funds contributed to an MSA are not taxed, as long as they are used to pay for qualified medical expenses.
- Unlike an HSA, you cannot deposit more money into the account. Once you have used the money in the account, you have to pay out of pocket until you reach your deductible.
- After reaching your deductible, your MSA plan covers 100% of the cost for Medicare-covered services.
MSA plans do not have provider networks so you may see any doctor, specialist or hospital that accepts Medicare.
Medicare MSA plans are currently only available in New Hampshire but due to their popularity I am confident they will come to Maine very soon.
Still have more Questions?
If you would like help finding answers to your questions, you can call me directly at 207-370-0143 or use my simple form on the CONTACT page of this site to send an email message. I am always happy to help!
The best part about working with me is that it costs you nothing! I am paid by the insurance companies in the form of a commission when I enroll someone in a plan.
This is the same way it works when you buy car insurance or your home owners insurance. You do not pay anything to the agent and you will pay the same price for your insurance that everyone pays whether they had my help or not.