Texas Land Attorney

HSA - Health Spending Accounts

A growing wealth planning tool, the Health Spending Account (HSA), was enacted by a Medicare bill signed into law December 8, 2003. Under this program, individuals are able to absorb some of their own health risks and lower their premiums as a result.

The HSA program works in conjunction with your health insurance, which must be a High Deductible Health Plan (HDHP). This type of insurance is useful for individuals who do not need regular medical treatment or medication. The drawback is that the deductible must be signficant ($2,200 for a family at a minimum). This means that the bulk of your medical expenses will need to be paid out of pocket until the deductible is met.

With a high deductible comes a much lower premium. With lower premiums, individuals can often afford to contribute money to their HSA.

HSA contributions are tax free (above line deduction if paid for with after tax dollars). The maximum contributions of pretax dollars as of 2007 is $2,850 for individuals and $5,650 for families. These values are adjusted upwards for inflation.

The money contributed to the HSA can then be invested or held in a higher interest savings account. Many Banks and Financial Companies have options for individuals wanting to set up an HSA.

If you do get sick or injured, you can take funds from the HSA and use them to pay for “approved medical expenses”. These expenses include co-pays, deductibles, and other uncovered expenses. When the money from an HSA is used for this purpose, there is no tax consequence.

For complete details on the HSA program and how to establish your own, visit the U.S. Treasury section on Health Savings Accounts (HSAs).