HSAs and Tax Time: eHealthInsurance Answers Questions About Health Savings Accounts
New HSA Center From eHealthInsurance Provides Side-by-Side Comparisons of Top-Rated HSA Administrators and Other Resources
MOUNTAIN VIEW, CA -- (Marketwire) -- 04/09/09 -- As the April 15th deadline for filing2008 income tax returns approaches, more Americans are seeking ways to savemoney on taxes, healthcare and health insurance. According to eHealthInsurance(www.ehealthinsurance.com), Health Savings Accounts (HSAs) have become a popular wayfor consumers to pay for qualified medical expenses usingpre-tax dollars. HSAs are tax-advantaged savings accounts paired withhigh-deductible health insurance plans.
In the fourth quarter of 2008, eHealth, Inc., parent company ofeHealthInsurance, the nation's leading online source of health insurancefor individuals, families and small businesses, reported an 18 percentincrease in submitted applications for private individual and family healthinsurance over the fourth quarter of 2007, which included applicationsfor high-deductible health insurance plans eligible for use with HSAs.
eHealthInsurance.com has provided several tools for consumers in responseto increased interest in HSAs and HSA-related questions received in itscustomer care center.
eHealthInsurance's HSA Resource Center (www.ehealthinsurance.com/hsa)includes:
-- HSA AdministratorComparison tools: Make side-by-side comparisons of quality HSAadministrators (banks) and compare interest rate structures, investmentoptions and monthly maintenance fees in a single location.
-- A Searchable HSA Help Center: Find answers to basicquestions about HSA-eligible health insurance plans.
-- An HSA Calculator: Calculate how muchmoney you can save in taxes each year with an HSA, and how much you'll haveavailable in your HSA by the time you retire.
eHealthInsurance is also providing a list of frequently asked questionsreceived at its customer care center about HSAs.
1. What is an HSA (Health Savings Account)?
Answer: An HSA is a tax-advantaged savings account you can use inconjunction with certain high-deductible (low premium) health insuranceplans. Account contributions, qualified distributions and earnings are alltax-exempt. An HSA allows you to deposit a portion of your pre-tax incomeinto an FDIC-insured savings account and use those funds to pay forqualified medical expenses. Any unused money stays in the account from yearto year and most HSA banks offer a variety of investment options, includingFDIC-insured savings accounts, and market-based investments. Interest orinvestment returns accrue tax-free. Prior to age 65, penalties may applywhen funds are withdrawn to pay for anything other than qualifying medicalexpenses. Once you turn age 65, you can also use your account to pay forthings 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 aninterest-bearing, FDIC-insured, savings account. But, most HSAadministrators 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 forthe 2008 tax year?
Answer: Like an IRA you have until April 15, 2009 to contribute money intoyour HSA for 2008 tax purposes. eHealthInsurance recommends you speak to alicensed tax professional before making any investment or tax-relateddecisions.
4. I've lost my job and I can't afford COBRA. But, I have an HSA through myformer employer. What happens to the money in my HSA when I don't opt forCOBRA?
Answer: The great news is that once open, your HSA stays with youregardless of who you buy health insurance from. So, if you lose your joband don't opt to continue your HSA-eligible health plan through COBRA, youcan 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 youenroll in an HSA-eligible health plan at a later date you will have theoption 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 topay 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 Imaximize my pre-tax contribution to my HSA?
Answer: The maximum that the IRS will allow you to contribute to an HSA forthe 2008 tax year is $2,900 for an individual plan and $5,800 for a familyplan. 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 healthplan?
Answer: The smallest deductible you can get with an HSA-eligible healthplan is $1,100 for an individual and $2,200 for a family. It's alsoimportant to note that the out-of-pocket maximum (the maximum amount you'llbe required to pay out-of-pocket in a benefit year, typically includingco-payments, coinsurance, and deductibles) for an individual plan can't bemore 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 alevel of commitment once I sign up?
Answer: There is a maximum amount you can contribute each year, but thereis no monthly minimum. You typically have the option to manage your HSAonline, and change your contributions as you see fit. If you have an HSAthrough your employer, and they allow you to make your HSA contributionsthrough payroll deductions, it's probably more convenient to contribute thesame amount each month.
9. Do I have to spend the money in my HSA account before the income taxdeadline, and, if so, can I take money back out of the account to avoidlosing it?
Answer: No. This is not a "use it or lose it" kind of account. You're notrequired to take a distribution from your account each year. In fact, youcan delay making medical payments out of your HSA and let your balance growtax free. Once you turn age 65, you can also use your account to pay forthings other than medical expenses. If used for other expenses, the amountwithdrawn will be taxable as income but will not be subject to any otherpenalties. Withdrawals from an HSA for non-qualified medical expensesbefore you turn 65 are assessed a 10 percent tax penalty. Before making anyinvestment or tax-related decisions, eHealthInsurance recommends you speakto a licensed tax professional.
About eHealth, Inc.:
eHealth, Inc. (NASDAQ: EHTH) is the parent company of eHealthInsurance, thenation's leading online source of health insurance for individuals,families and small businesses. Through the company's website,http://www.ehealthinsurance.com, consumers can get quotes from leadinghealth insurance carriers, compare plans side-by-side, and apply for andpurchase health insurance. eHealthInsurance offers thousands of healthplans underwritten by more than 180 of the nation's health insurancecompanies. eHealthInsurance is licensed to sell health insurance in all 50states and the District of Columbia. eHealthInsurance and eHealth areregistered trademarks of eHealthInsurance Services, Inc.