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Thu, April 9, 2009 eHealthInsurance: HSAs and Tax Time: eHealthInsurance Answers Questions About Health Savings Accounts
MOUNTAIN VIEW, CA--(Marketwire - April 9, 2009) - As the April 15th deadline for filing 2008 income tax returns approaches, more Americans are seeking ways to save money on taxes, healthcare and [ health insurance ]. According to eHealthInsurance ([ www.ehealthinsurance.com ]), [ Health Savings Accounts ] (HSAs) have become a popular way for consumers to pay for qualified medical expenses using pre-tax dollars. HSAs are tax-advantaged savings accounts paired with high-deductible health insurance plans.
In the fourth quarter of 2008, eHealth, Inc., parent company of eHealthInsurance, the nation's leading online source of health insurance for individuals, families and small businesses, reported an 18 percent increase in submitted applications for private individual and family health insurance over the fourth quarter of 2007, which included applications for high-deductible health insurance plans eligible for use with [ HSAs ].
eHealthInsurance.com has provided several tools for consumers in response to increased interest in HSAs and HSA-related questions received in its customer care center.
eHealthInsurance's HSA Resource Center ([ www.ehealthinsurance.com/hsa ]) includes:
-- [ HSA Administrator Comparison tools: ] Make side-by-side comparisons of quality HSA administrators (banks) and compare interest rate structures, investment options and monthly maintenance fees in a single location.
-- [ A Searchable HSA Help Center ]: Find answers to basic questions about HSA-eligible health insurance plans.
-- [ An HSA Calculator ]: Calculate how much money you can save in taxes each year with an HSA, and how much you'll have available in your HSA by the time you retire.
eHealthInsurance is also providing a list of frequently asked questions received at its customer care center about HSAs.
Questions:
1. What is an HSA (Health Savings Account)?
Answer: An HSA is a tax-advantaged savings account you can use in conjunction with certain high-deductible (low premium) health insurance plans. Account contributions, qualified distributions and earnings are all tax-exempt. An HSA allows you to deposit a portion of your pre-tax income into an FDIC-insured savings account and use those funds to pay for qualified medical expenses. Any unused money stays in the account from year to year and most HSA banks offer a variety of investment options, including FDIC-insured savings accounts, and market-based investments. Interest or investment returns accrue tax-free. Prior to age 65, penalties may apply when funds are withdrawn to pay for anything other than qualifying medical expenses. Once you turn age 65, you can also use your account to pay for things other than medical expenses.
2. Do I have to invest my HSA money in the stock market?
Answer: No. With an HSA you have the option to keep your money in an interest-bearing, FDIC-insured, savings account. But, most HSA administrators offer mutual funds or other investment options for you, which you control, after a minimum account balance (varies by bank) is met.
3. Was December 31st the last day I could contribute money into my HSA for the 2008 tax year?
Answer: Like an IRA you have until April 15, 2009 to contribute money into your HSA for 2008 tax purposes. eHealthInsurance recommends you speak to a licensed tax professional before making any investment or tax-related decisions.
4. I've lost my job and I can't afford COBRA. But, I have an HSA through my former employer. What happens to the money in my HSA when I don't opt for COBRA?
Answer: The great news is that once open, your HSA stays with you regardless of who you buy health insurance from. So, if you lose your job and don't opt to continue your HSA-eligible health plan through COBRA, you can still use the money in your HSA to pay for qualified medical expenses. But you won't be able to continue putting money into your HSA. If you enroll in an HSA-eligible health plan at a later date you will have the option to move any money you have in your current HSA into your new HSA.
5. I lost my job and I have elected COBRA. Can I use the money in my HSA to pay my monthly premiums?
Answer: Yes, you can use the money in your HSA to pay COBRA premiums.
6. What's the maximum I can contribute to an HSA this year? How can I maximize my pre-tax contribution to my HSA?
Answer: The maximum that the IRS will allow you to contribute to an HSA for the 2008 tax year is $2,900 for an individual plan and $5,800 for a family plan. HSA account holders who are 55 or older can contribute an additional $1000 in the form of a catch up contribution.
7. What's the smallest deductible I can have with an HSA-eligible health plan?
Answer: The smallest deductible you can get with an HSA-eligible health plan is $1,100 for an individual and $2,200 for a family. It's also important to note that the out-of-pocket maximum (the maximum amount you'll be required to pay out-of-pocket in a benefit year, typically including co-payments, coinsurance, and deductibles) for an individual plan can't be more than $5,600 or $11,200 for a family. These caps are set by the IRS.
8. Can I contribute a different amount each month, or am I committed to a level of commitment once I sign up?
Answer: There is a maximum amount you can contribute each year, but there is no monthly minimum. You typically have the option to manage your HSA online, and change your contributions as you see fit. If you have an HSA through your employer, and they allow you to make your HSA contributions through payroll deductions, it's probably more convenient to contribute the same amount each month.
9. Do I have to spend the money in my HSA account before the income tax deadline, and, if so, can I take money back out of the account to avoid losing it?
Answer: No. This is not a "use it or lose it" kind of account. You're not required to take a distribution from your account each year. In fact, you can delay making medical payments out of your HSA and let your balance grow tax free. Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Withdrawals from an HSA for non-qualified medical expenses before you turn 65 are assessed a 10 percent tax penalty. Before making any investment or tax-related decisions, eHealthInsurance recommends you speak to a licensed tax professional.
About eHealth, Inc.:
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