TITLE

New Health Savings Accounts Can Reduce the Cost of Medical Care

AUTHOR(S)
Gardner, Randy; Welch, Julie; Garcia, Denise
PUB. DATE
June 2004
SOURCE
Journal of Financial Planning;Jun2004, Vol. 17 Issue 6, p34
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The article focuses on Health Savings Accounts (HSA) established under the U.S. Medicare Prescription Drug, Improvement and Modernization Act of 2003. HSA replace employer-provided Archer Medical Savings Accounts (MSA), which continue in use but cannot be created after 2003. Such accounts are a significant improvement over MSA for several reasons. First, HSA accounts are owned by the individual, not the employer. Second, 100 percent of the health-insurance deductible can be contributed and deducted by the individual or employer. To be eligible for an HSA, the individual must meet several conditions. First, they must be covered under a high-deductible health insurance plan (HDHP). Second, the individual may not be covered by any other health plan that is not an HDHP, including a spouse' plan, parent's plan or Medicare. Third, the individual claiming deductible contributions to the HSA may not be claimed as a dependent on another person's tax return. Qualified medical expenses that the individual can have the HSA pay include expenses that would be deductible for tax purposes as medical expenses and nonprescription drugs, as long as they are not reimbursed by the HDHP. The maximum annual deductible contribution an individual can make to an HSA is the lesser of the individual's annual deductible under the HDHP or $2,600 for self-only coverage or $5,150 for family coverage. If the individual is 55 to 64, the individual can contribute $500 extra to an HSA in 2004. This extra contribution increases $100 annually, until it reaches $1,000 in 2009. Contribution balances not used to pay deductibles or co-pays are carried forward. HSA accounts are saving and investment vehicles that allow individuals more control over their healthcare decisions. Such accounts are a financial planning tool that should be considered by each of our clients.
ACCESSION #
13473221

 

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