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 Your
HSA and Qualified Medical Expenses
HSA money can pay for any “qualified
medical expenses” permitted under
federal tax law. This includes most medical, dental, vision and chiropractic
care and over-the-counter drugs such as aspirin.
HSA money can pay medical expenses for yourself, your spouse, or your
dependent children even if your spouse and dependents are not covered
by your HDHP!
Your HSA and Non-Qualified Medical Expenses
Payments for services other than “qualified medical expenses” are taxable
as income and subject to an additional 10% tax penalty, except after
age 65 when the penalty no longer applies. Examples of taxable
income include:
• Medical expenses not considered “qualified medical expenses” (i.e.
cosmetic surgery).
• Other types of health insurance unless specifically
described above.
• Medicare supplement insurance premiums.
• Expenses that are not medical
or health-related.
High Deductible
Health Plans for Your HSA
To open and contribute to an HSA you must have coverage
under an HSA qualified “High Deductible Health Plan” (HDHP). Federal law requires
a health insurance deductible for 2008 of at least $1,100 (self-only coverage)
and $2,200 (family). Maximum HSA contributions for 2008 are $2,900 (self-only) and $5,850 (family).
In addition, annual out-of-pocket expenses under the plan for 2008
(including deductibles, co-pays, and co-insurance) cannot exceed $5,600 (self-only
coverage) and $11,200 (family).
The deductible must apply to all medical
expenses (including prescriptions) covered by the plan. However, plans can
pay “preventive
care” services on a first-dollar basis (with or without a co-pay). "Preventive
care" can include routine pre-natal and well-child care, child and adult immunizations,
annual physicals, mammograms, pap smears, etc.
All contributions (including catch-up contributions) must be pro-rated. Your
annual contribution depends on the number of months of HDHP coverage you have
during the year (count only the months where you have HDHP coverage on the
first day of the month). Contributions can be made up to April 15 of the following
year. Individuals age 55 and older
can also make additional “catch-up” contributions.
HSA and Premiums
You cannot use an HSA to pay medical insurance premiums, except
under specific circumstances, including:
• Health plan coverage while receiving
federal or state unemployment benefits.
• COBRA continuation after leaving a
company that offers health insurance.
• Qualified long-term care insurance.
• Medicare premiums and out-of-pocket expenses,
including deductibles, co-pays, and coinsurance for: Part A (hospital), Part
B (physician and outpatient), Part C (HMO's and PPO's) and Part
D (prescription drugs).
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The out-of-pocket maximums are:
2008 Minimum HSA deductibles of $1,100 self-only and
$2,200 family.
2008 Maximum HSA contributions of $2,900 self-only and
$5,850 family.
2008 Maximum HSA out of pocket expenses of $5,600 self-only
and $11,200 family. |
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