What’s New In Health Savings Accounts And What It Means To You

New in Health Savings Accounts and What It Means To You

Health insurance has seen some good and significant changes recently - especially in the area of health savings accounts (HSA's), and this means that there are more benefits to be passed on to you. In December of 2006, Congress passed some new changes that will affect many people - starting January 1st of 2007. Considering that HSA's were started as recently as 2003, this shows significant progress.

Health savings accounts are actually attachments made to a health insurance plan that has a high deductible (HDHP - High Deductible Health Plan). In order for a particular health plan to qualify as an HDHP, it must have a deductible amount between $1,100 up to $5,500 for singles in 2007, and between $2,200 up to $11,000 for families.

Other features of health savings accounts that enable them to attract those looking to be able to combine savings with health insurance are:

- Deposits are tax deductible

-Amounts used for medical purposes are tax-free

- Accumulates interest

- Money stays in account and builds from year to year

- Money remains under your control

Even with these great features, there are now some that make it even better. Here are some of them and how they can benefit you.

1. Deposit Maximum Deductible - Even If Your Plan Does Not Require It

In previous years the maximum amount that you could deposit into the account was the amount of your deductible on your health insurance policy. The changes now mean that even if your deductible is $2,000 as a single person, you can still deposit up to the maximum deductible of $2,850. You are no longer limited by the deductible and can put into your savings a higher amount to be able to earn a greater interest. There is an even greater amount that can be deposited if you are 55 or older. For 2007, you can deposit an additional $800, and in 2008, this extra amount is raised to $900.

2. Take Advantage of Full Year Deposits Even with Partial Year Enrollment

Even if you now enroll in September, you can still take advantage of a full year's deposit. You are not limited now by how much you can deposit because it is not placed on a monthly basis. Previously, you were allowed to deposit 1/12 of the total amount for each month that you were enrolled. This stipulation has been removed but you still must meet the qualification of a testing period, which means that you must still be enrolled at the end of the 12th month from the time you enroll.

3. Transfer Funds from an FSA or MSA to an HSA

If you already have a Health FSA (Flexible Savings Account), an MSA (Medical Savings Account), or even an HRA (Health Reimbursement Account), then you are allowed to make a transfer from the account to your HSA. You can only do this once, however, in your lifetime, from each type of account, but you cannot make a transfer out of an HSA to any other savings type of plan. The limit placed on this type of transfer is $2,000. The eligibility for this type of transfer further demands that you no longer be eligible for medical care under that plan. There is a time limit placed on when these transfers can be made, and that is January 1, 2012.

Besides being able to make the above transfers, you can also make non tax-deductible transfers from an IRA, too. The only limit is the amount of deductible that is found on your health insurance policy. Again, the once in a lifetime policy applies - with one exception. If you make the first transfer as a single person, you can also make another transfer if you become married within the same year. The total amount contributed cannot be greater than the deductible amount on the policy. Transfers can also be made from one HSA to another.

4. Employees with FSA's can make Contributions to an HSA In Spite Of Grace Period

Under the old way of doing things, if you currently were a member of an FSA plan, then you could not either start an HSA or contribute to one until the first day of the first month after the grace period of the FSA expires. Now, you can make deposits into the account in spite of having an FSA, but you must deposit all of the balance into the HSA. Another stipulation is that you need to have less money in your FSA account than what you had as of September 21, 2006 in order to qualify. If this is not the case, then you still must wait until the end of the grace period.

Each of these new changes in HSA's means greater flexibility for you and for your employer. These policies are now more consumer friendly than ever before. Perhaps it is time for you to start looking into getting your own and combine your needs of lower cost healthcare and a good way to save for retirement, too.