Health Savings Accounts (HSAs) live to see another day.

Posted by Phil Dougherty
September 17, 2013

I am pleased to see there will be HSA compatible plans available in our new health care system. One of my first concerns after the Health Care Reform law passed was whether HSAs would be outlawed.  It has been no secret that the current administration is no fan of HSAs; considering them another savings scheme for the wealthy.  The State of California is no fan either and still refuses to allow the HSA tax deduction.

If bureaucrats actually understood the concept and used some creativity, they would see HSAs as a great opportunity for all people (and a better solution to our health care crises!), but that is for another time.

In this new marketplace, there will be four levels of coverage available. (See my July 25 blog posting, Health Care Reform. Here are the changes in a nutshell.) The Bronze level plans, which are those with higher deductibles and lowest premiums, will have HSA compatible plans in the mix.  Those currently enrolled in an HSA compatible plan, and are funding an account to cover eligible medical expenses, can continue to do so as long as HSA compatible coverage is continued in our new health care system. Those who have avoided HSAs or are unfamiliar with the concept will have an opportunity to reconsider them. Click here to visit my web page and learn more about HSAs.

If you wish to continue utilizing the tax saving benefits of a Health Savings Account, it is imperative that your new insurance plan under the new system be HSA compatible. Those of you in non-grandfathered HSA compatible plans will likely “map” to a new HSA compatible (and Affordable Care Act (ACA) compliant) plan by your existing carrier.  But you have the freedom to enroll in another carrier’s HSA compatible plan if you choose (or any other plan for that matter). Cost will of course be one factor to consider in choosing coverage, but a strong provider network could be just as important.

Investment tip:  An HSA is the only investment in which money deposited in the account is tax deductible, grows tax-deferred, and can be withdrawn anytime for medical expenses tax free (even in retirement).  Please talk with your financial planner to see if an HSA is right for you.

Note: For 2014, the maximum HSA contribution will increase to $3,300 for individuals and $6,550 for two or more enrolled in HSA compatible insurance.

Phil Dougherty