Illinois Health Insurance – The Basics of HSA’s
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A Health Savings Account (HSA) is a custodial account or tax exempt trust exclusively for the purpose of paying medical expenses under a qualified High Deductible Health Plan (HDHP). This is an alternative to comprehensive Illinois health insurance. It allows individuals to pay for their current health care expenses as well as save for future medical, dental and vision expenses on a tax free basis. The money contributed to the HSA is controlled by the policy-holder and is used at their discretion for their personal medical expenses as well as other policy beneficiaries. This is unlike Health Reimbursement Arrangements (HRA’s). They are held by the employer.
The minimum deductibles for HDHP’s may vary from year to year. If you are interested in opening an HSA, check with approved companies in your area to see if your existing policy qualifies. Whether you have an Illinois health insurance HDHP policy through your employer or are carrying an individual health insurance policy, you can open an HSA. There are many benefits to having a health savings account. One of the most important factors for many people is that the funds rollover and accumulate year over year if not used. This differentiates them from a flexible spending account.
Contributions are allowed to be made through an employer on a pre-tax basis, either from the employer or the employee. If contributions are made post-tax, it can be used to lower gross taxable income on the tax forms for that year. The primary financial advantage for this type of savings account is the FICA and Medicare Tax deductions. It saves 7.65% for each employee and employer. For Illinois health insurance plans, some providers have a choice of three deductibles that accompany qualified HDHP’s. Funds in these accounts can be invested and are non-taxable.
They work much the same way that an Individual Retirement Account (IRA) does. There are also Illinois health insurance benefit groups that provide these savings accounts that can hold both cash and investments. In these plans, the contents of an HSA can be rolled from one fund to another, they cannot be rolled into an IRA, nor can an IRA be moved to an HSA. Withdrawals can be made at any time and are not subject to taxation if used for qualified medical reasons. Depending on the institution that holds the account, debit cards or checks are provided for withdrawals, while others allow a reimbursement process similar
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