Health Savings Account Changes For 2012
Health Savings Accounts are changing for 2012...contribution limits, that is. Individual and family contribution rates will be increasing.
The IRS has officially determined the 2012 Health Savings Account (HSA) and High Deductible Health Plan (HDHP) maximum contribution amounts. This affects existing HSA account holders and any individual or family that purchases this type of health care in 2012.
An HSA is a popular form of health care that allows you to purchase your medical, vision and dental benefits from a separate account containing your contributions. If used for qualified expenses, your deposits are tax-deductible and continue to accumulate year after year. A High Deductible Health Plan (HDHP) must be used in conjunction with the HSA. An HDHP is a catastrophic medical policy that provides comprehensive coverage once a deductible has been met. Qualified preventive items are covered without meeting the deductible.
The IRS has the final say in determining which expenses qualify for deductions. But typically, there are many types of expenses that qualify such as eyeglasses, hearing aids, some insurance premiums, long-term care, prescribed prescriptions, prescribed therapy and many weight-reduction programs. A complete list of expenses can be found here. http://www.irs.gov/pub/irs-pdf/p502.pdf
2012 HSA Limits
$3,100 Individual Contribution Limit
$6,250 Family Contribution Limit
$6,050 Individual HDHP Out Of Pocket Maximum
$12,100 Family HDHP Out Of Pocket Maximum
$1,200 Minimum Deductible for Individual HDHP
$2,400 Minimum Deductible For Family HDHP
$1,000 Catch-Up Contribution
You determine how much (if any) you want to deposit into your account. You can set up a systematic system of monthly deposits or make periodic deposits throughout the year. You are free to pick the bank of your choice to administer the account. Not all banks offer this service and some may charge a monthly maintenance fee.
If you already have active checking or savings accounts, it may be advisable to check with that particular bank first since they may charge lower or no fees. If you move to a different state, you can keep your account. Of course, as an example, Ohio insurance rates will differ than an Indiana HSA insurance rate.
You will also decide how the money is invested in the HSA and what risk (if any) you want to take with your funds. Most accounts pay a “fixed” interest rate. Although rates are currently very low, you entail very little or no risk. And at the end of the calendar year, you do not lose your money since it “rolls over.”
Health Savings Accounts have been increasing in popularity since the 1990s. Premiums on HSA policies are generally lower (often substantially lower) than other types of medical coverage. While they are not an ideal solution for every individual and family, they are a great alternative to the constantly-increasing rates of conventional health insurance coverage.
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ABOUT THE AUTHOR
Ed Harris provides free medical insurance quotes to consumers.