Health Savings Accounts (HSAs) Explained

Health Savings Accounts (HSAs) were created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003, and are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis.

With an HSA, members can pay for insurance deductibles, co-insurance and other out-of-pocket expenses not covered by health plans, such as Lasik eye surgery or orthodontia, with tax-free dollars.

To be eligible, you must have insurance coverage through a qualifying high-deductible health plan, and a HSA must be opened with a qualified trustee such as a banking institution. You may not be covered on any other health plan, claimed as a dependent on someone else’s tax return or be over the age of 65 and eligible for Medicare. A "High Deductible Health Plan" (HDHP) is a plan with a minimum deductible of $1,000 for self-only coverage and $2,000 for family coverage with an annual out-of-pocket (including deductibles and co-pays) that does not exceed $5,000 self-only coverage and $10,000 family coverage. These amounts are indexed to inflation. HDHPs can have first dollar coverage (no deductible) for preventive care and higher out-of-pocket (co-pays and co-insurance) for non-network services.

An ODS qualified HDHP may be the right option for you compared to a more traditional plan. Rates for HDHPs are lower than traditional plans and the savings can be used to fund the HSA.

When a savings account has been established, employers and individuals may contribute to the account, however, once the money is deposited it belongs to the member and can grow from year to year. The account holder may invest the account funds, earn investment income on the balance and withdraw money for medical expenses, tax-free. Amounts contributed to an HSA belong to individuals and are completely portable. Every year the money not spent stays in the account and gains interest tax-free, just like an IRA. Tax-advantaged contributions can be made in three ways: The individual and family members can make tax deductible contributions to the HSA even if the individual does not itemize deductions; the individual’s employer can make contributions that are not taxed to either the employer or the employee; or employers with cafeteria plans can allow employees to contribute untaxed salary through a salary reduction plan.

To encourage saving for health expenses after retirement, HSA owners between age 55 and 65 are allowed to make additional catch-up contributions ($500 in 2004) to their HSAs. Individuals eligible for Medicare, may not open an HSA.

ODS has a strategic relationship with Wells Fargo to administer the savings portion of the HSA. Wells Fargo offers a proven track record, excellent investment options, access to the HSA account with a debit card and online services to track available balances and investment earnings. You may also open your HSA with another financial institution of your choice.

ODS feature a range of benefits that fit the needs of employees and individuals. All ODS members have access to great physicians and hospitals, but ODS members can also access doctors and registered nurses any time of the day or night (with our online eDocAmerica secure messaging service and a 24-Hour Registered Nurse Advice Line). These free services provide valuable medical information and can help you manage the healthcare needs of you and your family.

Read about HSA plans and accounts offered through ODS or contact ODS Marketing at 1-800-578-1402.

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