Health Savings Account (HSA) vs. Traditional Health Plan
Health Savings Account (HSA) vs. Traditional Health Plan Definitions
- Health Savings Account (HSA)
- An HSA is a tax-advantaged account established to pay for qualified medical expenses of an account holder who is covered under a high-deductible health plan. With money from this account, you pay for health care expenses until your deductible is met. Any unused funds are yours to retain in your HSA and accumulate towards your future health care expenses or your retirement.
In order to put money into an HSA you are required to have a High Deductible Health Plan (HDHP) in effect for either you or your family. A HDHP is simply health insurance that meets certain minimum deductible and maximum out-of-pocket expense requirements. **HSA_LIMITS_DEFINITION**
- Annual prescriptions
- Number of prescriptions you expect to fill annually.
- Annual doctor visits
- Number of times you expect to visit the doctor's office annually.
- Marginal income tax rate
- Your estimated Federal marginal income tax rate. **TAXTABLE_CURRENT_DEFINITION**
- Monthly premium
- Monthly premium for your proposed health insurance options.
- Annual deductible
- Annual deductible that you are required to pay before your health insurance begins coverage. We assume that after this threshold has been reached that your insurance covers 100% of your expenses. In 2018, for a HDHP, the minimum deductible amount is $1,350 for self-only coverage and $2,700 for family coverage.
- Maximum annual out-of-pocket
- Maximum out-of-pocket in a given year for your health insurance. This is the maximum total expense that you could incur in a given year with your proposed coverage. A HDHP must also have a maximum out-of-pocket expense per year. For 2017, this maximum is $6,550 for self only coverage and $13,100 for family coverage.
- Co-pay for doctor visits and prescriptions
- The fee you pay for each prescription and/or doctor's visit. These payments do not count toward your annual deductible or your maximum out of pocket expense.
- The percentage of your health care costs that your insurance will cover after your costs exceed your annual deductible. You are assumed to continue to pay this percentage of your health care costs until you reach your annual maximum out of pocket expense.
- Other expenses
- Any other expenses that would normally be covered by your health insurance. This would include lab fees and services other than prescriptions and doctor visits. Don't include medical expenses not normally covered by your insurance such as some elective surgery, contact lens solution or over the counter medications.
- HSA contributions
- Total you expect to contribute to an HSA account per year. All contributions to an HSA account are tax deductible and withdrawals for qualified medical expenses are not subject to income tax. For 2017, the maximum contribution to an HSA is $3,400 for self-only coverage and $6,750 for family coverage.