HSA Plans are some of the most affordable health plans out there because they have a higher deductible.  HSA plans are health plans that are used in conjunction with a Health Savings Account (HSA) which are tax-favored accounts that allow you to contribute funds on a pre-tax or tax-deductible basis, which you may use to pay for eligible medical expenses.

HSA Plans are so important because:

• They make Healthcare affordable for tens of millions of Americans - the premium is usually half the cost of traditional lower-deductible plans.

• HSAs reward consumers for making financially and medically sound choices like choosing generic over brand-name drugs, or, better yet, finding less-invasive natural remedies instead of prescriptions (see Wellness for discussion of prescription drugs).

• HSAs significantly reduce about 20% of the nation's current healthcare expenditures in paperwork processing .

• HSA Plans are a great second retirement account to help build your savings and it might be wise to fully fund your HSA even before your IRA or 401k*** because:

• HSAs have a TRIPLE TAX advantage:
• Contributions are tax deductible going in
• Appreciation is tax-free
• Withdrawals are tax-free when used for qualified medical expenses.

Affordable Health Plans - HSA Plans

An HSA Plan is more affordable because the premiums for the medical coverage are lower than traditional healthcare plans.  Now, of course there is a reason behind the lower premiums - HSA Health plans are High Deductible Health Plans.  Typically you must first meet your annual deductible for Doctor's visits and prescriptions - you won't have co-pays like traditional healthcare plans. Athough some plans offer first-dollar coverage (i.e.-no deductible) for preventative care.

To help you cover these "first-dollar" purchases of Doctor visits and prescription drug costs - you should invest at least the difference of what will be saving annually on your premiums when you change from the "traditional" plan to the HSA qualified plan  Or better yet - max out the contributions to your HSA plan - for example:

	Formula	Plan A [without HSA]	Plan B [with HAS]
Estimated annual covered medical expenses	[a]	$2,000	$2,000
Estimated annual non-covered health expenses [glasses, contacts, dental care]	[b]	$600	$600
Expense calculation
Annual Premium [family of 3]	[c]	$11,724	$4,920
Out of pocket costs subject to deductible	[d]	$2,000	$0  *
Out of pocket costs for non-covered health expenses [glasses, contacts, dental care]	[e]	$600	$0  *
Annual HSA contribution	[f]		$6,150 [max contribution for family]
Total Annual Expenses	[g] = [c+d+e+f]	$14,324	$11,070
Savings calculation
Current year tax reduction due to HSA contribution based on a 28% tax bracket	[h]	N/A	$6,150 X  .28 $1,722 tax savings
Remaining current HSA Contributions [minus expenses withdrawn for year]	[i] = [h + i]	N/A	$6,150 -$2,600 $3,550 savings rolled over to next year for medical costs
Total annual savings	[j] = [h + i]	N/A	$5,272
Net savings with HSA Plan	[g – j]	N/A	$5,798

*If amount exceeds HSA contributions, enter the additional out-of-pocket costs.  If the amount is less, enter $0

**Assuming a traditional medical plan with a low $1,000 deductible

Want to see if an HSA Plan is right for you?

Want to see if this affordable HSA Healthcare plan combined with a Heathcare Savings Account is right for you? 

HSA Plans - Maximum Contribution for current tax years

The Internal Revenue Service (IRS) sometimes changes the contribution level to HSA plans - current maximum contributions:

The 2011 IRS contribution limits are the same as the IRS contribution limits for 2010: $3,050 for single plan coverage and $6,150 for family plan coverage.

2011 IRS Limits
	Single Plan	Family Plan
Minimum Deductible	$1,200	$2,400
Maximum Out-of-pocket	$5,950	$11,900
Maximum Contribution Limit	$3,050	$6,150
Catch-up Contribution (55+)	$1,000	$1,000

***Please note that YourVirtualBenefits.com is not a tax advisor or attorney - consult those professionals for tax and legal matters.  None of the materials presented here should be considered tax or legal advice.