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Hsa Insurance Definition Question & Answers

2013 June 10
by Sarah Fields

Ken asks…

What are the advantages of having a HSA, heath savings account?

I am thinking of getting on ours at work, but I have used the insurance we have in the past for soo long and soo used tp paying the Co-pay at the doctor or pharmacy, etc.

I hear good and bad things about the HSA and having a hard time making a decision.


Sarah Fields answers:

The advantage touted most often is that it allows you to pay some qualified medical expenses with pre-tax income. What is often overlooked is that the definition of “qualified medical expenses” for an HSA is much more liberal than that under most group medical policies–eyeglasses, for instance, as well as over-the-counter meds. The biggest advantage, though, is that an HSA can become a significant part of your retirement planning. Unlike most flex spending or health care reimbursement accounts, an HSA is not a use it or lose it proposition. It’s your money, and if your employer helps in the contribution, it’s free money, free money that can accumulate handsomely for the increased medical expenses likely to occur in the golden years.

Joseph asks…

Can you deduct medical bills from your taxes?

I have a high deductible health insurance. They don’t pay anything out until I reach 6,000 out of pocket and them only 90%. I have paid out 8,000 in medical bills . This is 8,000 the health insurance didn’t pay. Problem is 6,000 of this 8,000 is for one medical bill and I am making payments on it. Since the 6,000 wasn’t covered by insurance can I still deduct the entire 6,000 or just the amount the I have paid to the doctor thus far.

Sarah Fields answers:

Do you actually pay any income tax?

See IRS pub 969.

By any chance to you already have an HSA? If not, you may have blown an opportunity.

My HDHP came with an HSA that opened the day I got the HDHP even if I didn’t fund it until later.
If you have a HDHP as per IRS definitions, and the HSA is set up BEFORE you incur the medical expenses, you can richocet money through the HSA (up to $3100 per year), then reimburse yourself. The advantage–you flip the money to pre-tax (via a deduction on the 1040) and save yourself 10-15% in taxes. Yes, you have to bounce the money through the account and that’s a pain if you don’t have some extra cash on hand.

If you try to claim the amount you paid on the schedule A, it evaporates.

As for when you paid it, payments to the doctor are in the year paid. Payments to a credit card that you used to pay the doctor would count as paid when charged to the card.

If you could have opened an HSA and didn’t, you can’t use these medical bills with it. The medical expense has to be AFTER you opened the HSA.

Betty asks…

Medical Reimbursement Plans – What are the pitfalls?

I’m a sole proprietor. My wife is the only employee. I have established an HSA through Anthem Blue Cross. Can I establish a medical reimbursement plan combined with my HSA? Does it even make sense to do so?

Sarah Fields answers:

A participant in an HSA plan may not also be a participant in a medical reimbursement plan. See IRC § 223(c). A Medical Reimbursement plan would not fall under the definition of permitted coverage

“Permitted coverage” (whether through insurance or otherwise) is coverage for accidents, disability, dental care, vision care or long-term care.

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