Skip to content

Health Savings Account Plans Question & Answers

2013 October 6
by Sarah Fields

Linda asks…

How are Archer Medical Saving Account and Health Savings Account different?

Greetings All,
Could anyone tell me the difference between Archer Medical Saving Account and Health Savings Account?
Under High deductible plan, there is an out-of-pocket limitation. Does this mean a taxper is limited to only deduct a certain amount of medical expenses?

Sarah Fields answers:

The Archer Medical Savings Account (MSA) was a precursor to the Health Savings Account (HSA). Major differences are:

1. The MSA applied only to self-employed individuals or employees in businesses with fewer than 50 employees. The HSA is available to anyone.

2. The minimum deductible amounts for both accounts was different. In 2005, the MSA single deductible was $1,750 versus $1,000 for HSA. Family deductible differed similarly.

3. The contribution limits were different .. 65% of deductible for MSA versus 100% of deductible for HSA.

4. The penalty for nonmedical withdrawals was 15% for MSA, and it is 10% for HSA.

Anyway, this doesn’t effect any taxpayers who did not have an MSA, since the MSA expired in 2005 (no new MSA plans are being created). Persons holding an MSA can roll it over to an HSA.

As for your second question, in an HSA for 2007 a single person can contribute 100% of his deductible (or $2,850 whichever is less), plus an $800 catchup for age 50 or over. This is not related to the maximum OOP expenses. The maximum OOP expenses is a criterion for a plan to be an HSA.

Your contribution to the HSA is tax-deductible (or pretax if your employer contributes). When you pay medical expenses from your HSA, it is not tax deductible. If you have other expenses that you did not pay out of your HSA, you can deduct them on Schedule A. In particular, OOP expenses not paid for with HSA money, no matter how much those expenses are, can be deducted on Schedule A.

From the wording of your question, you may be confusing a “tax deduction” on your tax return with the “deductible” on your HSA. The latter refers only to the HSA and not your taxes.

Jenny asks…

Can anyone here explain to me about health savings accounts and how they work?

I was reading about health insurance plans and how they work and I discovered something called a health savings account that insurance companies have. Do the health insurance contribute money to the plan or I can go to any bank an open an account with $100 in it?

Sarah Fields answers:

A Health Savings Account is an investment type account that is needed by people with insurance plans with very high deductibles. It works like this: You get a high deductible plan (say $2500) from your employer. You are responsible for the deductible, before the policy will pay anything. So, if you are married, you might need as much as $5000 for medical expenses. You set up an account and have money payroll deducted into the account. If you need money for medical expenses, you would draw from this account to pay the bills. The money you deposit is not taxed, similar to an IRA or 401K. If you don’t need the money, you can keep it there until you do, years down the road. You invest the money similar to an IRA or mutual fund. The policy premiums for your health insurance are low because you probably won’t need it. If you do use all of your deductible money, then the health insurance kicks in, usually for 100% of the next increment (depends on the policy, possibly another $2500) then, after that first $5000, if you still have medical expenses, ususally the policy pays at least 80% and you pay the remaining 20%, but there will still be a limit as to how much you would have to pay. Check with your Human Resources department for the particulars on your plan. See how much you have to pay out of pocket and what your premiums are, versus what a regular plan would be. Are you normally healthy? Maybe you go to the doctor once per year for about $150. If so, this might be a good plan for you.

Steven asks…

How do you know the deductible amount if plan doesn’t indicate the deductible amount for office visits?

I have the Lumenos Health Savings Account health plan. The annual deductibles, coinsurance, and out-of-pocket maximums for an individual is $1500. The plan says in-network office visits are 80% after deductibles. It does not indicate the deductible amount for office visits. So does this mean the plan pays 80% of whatever the office visit cost is and I pay the remaing 20% of the cost?

Sarah Fields answers:

Generally, there is No Deductable for Office Visits. There are Co-Pays. Look and see if it shows a Co-Pay for the Dr. Visits. Your plan may have No Co-Pay after you meet your Total Annual Deductable.

Powered by Yahoo! Answers

Leave a Reply

Note: You may use basic HTML in your comments. Your email address will not be published.

Subscribe to this comment feed via RSS