Health Savings Accounts have two parts. The first part is a HSA Qualified comprehensive health insurance policy with a minimum $1,000 deductible for individuals and $2,000 for families. Coverage includes Doctor Visits, Hospitalization, Prescription Drugs, Laboratory Tests, X-Rays, OB-GYN Exams, Maternity, Well Baby Care and other benefits found in better health insurance policies. Qualified HSA policies are offered by leading health insurance companies.

The second part is the "Medical IRA" (Tax Exempt Trust Savings Account) which offers significant tax advantages similar to a Traditional IRA, but even better:

You may contribute 100% of your deductible up to a maximum of $2,600 for individuals and up to $5,150 for families into the "Medical IRA" (Tax Exempt Trust Savings Account).

Your contribution is 100% TAX DEDUCTIBLE regardless of your gross income.

The HSA is often refereed to as a "Medical IRA" because the money in your account can be used to make TAX FREE withdrawals to pay for Qualified Medical Expenses including some alternative medical treatments below. The unused balance earns interest and grows.

Employer contributions are not taxable to employees.

Why should I have a Health Savings Account?

1. Save Money.
2. Reduce the cost of sky rocketing premiums by 20% to 60%.
3. Reduce your taxable income up to $2,600 for individuals and up to $5,150 for families.
4. Pay for Qualified Medical Expenses and alternative medical treatments TAX FREE!

Any individual who is not covered under a spouse's policy, a parents policy or entitled to Medicare benefits is eligible to establish a Health Savings Account.

Employers of any size with qualifying high-deductible insurance plans.

Self Employed.

What are examples of qualified medical expenses?

HSA's can be used to pay for many types of medical expenses, including those normally excluded from health insurance policies. For a complete list of qualified medical expenses refer to IRS Publication 502. Some of the qualified medical expenses include Long-Term Care premiums and:

Acupuncture Alcoholism (treatment) Ambulance (hire) Autoette or wheelchair Blind persons services Braces Capital expenditures - Home modifications for handicapped. Primary purpose must be medical care Car equipped to accommodate wheelchair and/or handicapped controls Childbirth preparation classes (mother) Chiropractors Christian Science treatment Contact lenses, replacement insurance Crutches Deaf persons - Hearing aid and batteries, Hearing aid animal and care, Lip reading expenses, Special education, modified telephone Dental fees Dentures Diagnostic fees Diapers (adult disposable) used due to severe neurological disease Doctor's fees Domestic aid - rendered by nurse Drug addiction recovery Drugs (prescription) Dyslexia language training Elevator alleviation of cardiac condition Eyeglasses and examination fee Fluoride device (on advice of dentist) Halfway house (adjustment to mental hospital) Healing services fees Health Maintenance Organization Hospital care Insulin Iron lung Laboratory fees Laetrile (by prescription) Lead paint removal

Legal expenses (authorizing treatment of mental illness) Lifetime medical care (Prepaid; retirement home) Limbs (artificial) Lodging (limited to $50/night) Long-Term Care premiums Mattress (prescribed for alleviation of arthritis) Membership fees (association furnishing medical services, hospitalization, and clinical care) Nursing home (medical reasons) Nursing services (board and Social Security paid by taxpayers) Obstetrical expenses Operations (legal) Optometrists Orthodontia Orthopedic shoes (excess costs Osteopaths) Oxygen/oxygen equipment Prosthesis Psychiatric care Psychologists Psychotherapists Reclining chair for cardiac patient Remedial reading Retarded person's costs for special home Retirement home Lifetime medical care Sanitarium rest home (medical, educational, rehabilitative services) Schools (special, relief, or handicapped) Sexual dysfunction treatment Surgical fees Swimming pool (treatment of polio or arthritis) Teeth (artificial) Television (closed-caption decoder) Therapy treatments (prescribed by a physician) Transportation (essentially and primarily for medical care) Vitamins (prescription) X-rays

• Long-Term Care Insurance premiums
• Health insurance coverage while receiving unemployment insurance
• COBRA health insurance continuation coverage
• Premiums for a health plan (other than a Medicare supplemental policy) for an individual age 65 or older

Every year you may contribute an amount equal to your deductible up to $2,600 for an individual or $5,150 for a family into your Health Savings Account with a Qualified Trustee. You do not have to contribute the maximum each year, although some HSA's require a small minimum contribution. Funds in an HSA are held in a trust account and administered by a bank, insurance company, or other approved Trustee for a minimal fee. Contributions to your HSA are invested at your discretion. Typically an HSA Trust Account will allow you to choose from the following options:

• Cash (FDIC Insured)
• CD's (FDIC Insured)
• Money Market Funds (FDIC Insured)
• Mutual Funds (Not FDIC Insured)

For individuals 55 years or older, the law provides for additional "Catch-Up" deposits. You may deposit an additional $500 in 2004. The amount of deposits will go up by $100 each year until the maximum catch-up amount of $1,000 is reached. If both husband and wife are 55 or older, they may both make additional contributions of $500.

To qualify the plan must be a High Deductible Health Plan (HDHP) and designated as a Health Savings Account.

For individuals the HSA must have a minimum $1,000 deductible and a $5,000 annual out-of-pocket maximum.

For families the HSA must have a minimum $2,000 deductible and a $10,000 annual out-of-pocket maximum. The sum of the annual deductible and the other annual out-of-pocket expenses required to be paid under the plan (other than premiums) can not exceed $5,000 for individuals and $10,000 for families.

HSA-Qualified health insurance plans offered by insurance carriers like Nationwide, Blue Cross, Blue Shield and others and are considerably less expensive than most non HSA plans. How do I use the funds in my HSA?

It's easy to use the funds in your Health Savings Account.

Typically the HSA Trust administrator will provide you with a checkbook, debit card or online bill pay options to pay for your Qualified Medical Expenses.

You do not need approval from your HSA administrator to use the funds in your account.

You do not need to submit receipts to your HSA administrator, although you should save them, just like you keep receipts for your other tax deductible items.

HSA's make it easy to save on your taxes.

At the end of each year, you will be sent a statement from your Trust administrator showing the amount you contributed to your HSA that year.

Because HSA's are similar to IRA's, deductions are "above-the-line" and can be taken even if you do not itemize.

If you are self employed, you have an extra bonus. In addition to Tax Deductions for your HSA contributions, you can also deduct 100% of your health insurance premiums provided:

You are not eligible to participate in a subsidized health plan offered by an employer or your spouses employer.

The deduction does not exceed the amount of net income from your business.

If the named beneficiary in your will is your spouse, your spouse will continue to access the funds tax-free for qualified medical expenses and pay income taxes on any non qualified medical expenses. If your beneficiary is anyone else, then they will generally owe income taxes when the assets are moved to them without any penalty.

The Optional Cash Back Plan Offsets Your Deductible

Hospital Confinement
The Optional Cash Back plan is a separate Supplemental Medical Reimbursement Expense Plan that pays up to $9,000 per calendar year ($300 per day up to 30 days) for hospital confinement from ALL Illnesses and Accidental Injuries. The Cash Back Plan helps to offset your deductible and reduce hospitalization costs. The plan pays regardless of any other insurance you carry. This plan has a Lifetime maximum of 300 days.

Accidental Injury
The Cash Back Plan also includes up to a maximum of $500 per year for Accidental Injury.

Ambulance
The Cash Back Plan also includes Payment up to $1,000 for Air Transportation and up to $300 for Land Transportation due to an Accident.

Mammography
The Cash Back Plan also includes up to $100 for Mammography screening (maximum of 1 visit per calendar year).

For additional HSA information for employers and self employed please read...  Health Savings Accounts for the Self Employed  (pdf)

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