Nevada HSA Plans
HSA Plans are probably one of the least understood and therefore the most hated of all health insurance plans. For people who do understand them, and the tax savings that come with them, they love HSA plans. Hopefully, I can use this short guide to explain how an HSA plan works. I will try to explain how you can use it to your advantage before setting up an HSA plan. There are two parts to an HSA plan. The first part is the HSA Qualified health plan and the second part is the HSA Qualified savings account. In order to set up the savings account, you need the health plan in place first. Nevada HSA plans will be a major medical plan. It’s established through a regular insurance company, like Prominence, Anthem, Hometown, or United.
Requirements of an HSA compliant health plan
Insurance companies need to meet specific requirements to call their plans HSA eligible. They used to call them a High Deductible Health Plan. Now the deductible isn’t so high anymore, so now they’re called Nevada HSA Qualified Plans. The deductible will be different for individuals and families. Families tend to get a higher amount. The deductible amounts change every year and can be found on the IRS website.
Nevada HSA Plans have other requirements as well. The insurance company may not cover your medical expenses until you pay your deductible first. Many non-HSA Qualified Plans allow you to pay a simple co-pay right away, without paying your deductible, such as $20 for the primary care doctor or $50 for a lab service. HSA Qualified Plans don’t include these co-pays without paying your deductible first.
Embedded vs. Non-Embedded Deductibles
This may be a good time to talk about embedded and non-embedded deductibles. HSA plans use non-embedded deductibles. This means that the family shares one deductible. Each person doesn’t have their own. If you have a family HSA plan, all family members would share HSA deductible amount. Each person does NOT have their own deductible that they need to pay. There is only an individual deductible if someone is on the plan by themselves.
After all of this, you may be thinking that this is probably a garbage health plan, and you would be right. HSA plans are some of the least expensive plans offered, and that’s the idea. The idea is to save as much as possible on the health plan and put as much money as possible into the savings account. Without the second part of the plan, the savings account, an HSA health plan by itself offers very little benefit. It does offer a discounted rate, or “negotiated rate” for medical services. Also, covered members get the benefit of an Out of Pocket Maximum or annual limit on the amount they would pay for covered medical services. Members on these plans usually have the same access to the same doctors, but the amount they pay for those doctors is greater.
The Savings Account
The second part, and possibly the most important, is the savings account. Here is the primary advantage: The government allows you to put aside tax-free money in a savings account to pay for eligible medical expenses. This money is personally held by the individual who owns the savings account.
The Benefits
Eligible Medical Expenses –
What the government calls an eligible medical expense for the purposes of an HSA will usually be much broader than what the insurance company covers. For example, the usual primary care doctor and specialist, along with dental and vision services, chiropractic services, Medicare Parts B and D, certain long term care insurance, COBRA premiums, and others. Also – Qualified medical services for your spouse and dependent children are also covered. This applies even if they’re not on your HSA Qualified health plan. See the IRS publication 502 for a full list of eligible medical expenses.
Tax Benefits –
There are 3 parts to the tax benefits offered with Nevada HSA plans. First, are the payments going into the savings account. Through a Section 125 plan, contributions made to the account through payroll are tax-free. If they don’t come through payroll you can still take a deduction. Your accountant can show you how on your personal tax return. Second, most HSA’s now involve an investment arm to them. These investments can grow tax-free. Third – When you take the money out of the account and spend them on qualified medical expenses they remain tax-free.
If you’re skeptical about tax savings or you’re not sure it offers you that much of a benefit please take a closer look at your pay stub. As with ANY tax strategy, please speak with your CPA or CFP before moving forward.
Carry-over –
This plan carries over from year to year and can accumulate. Other types of reimbursement accounts are on a use-it or loose-it type of system. This can even carry forward past age 65. For those who start early, it could be a great way to pay for Medicare part B and D after turning 65.
Portability –
When you leave the company the savings account is yours and it leaves with you.
The Costs
Setup is not automatic –
Insurance companies do not automatically set this account up for you when you purchase an HSA Qualified health plan. You need to go set this up with your bank or a bank that offers an HSA Qualified savings account. Having the health plan simply allows you permission to set up the savings account.
Annual limits on the contributions –
The amount you can contribute is set by the federal government and based on if you have an individual plan or a family plan. These limits change every year and can be found on the IRS website as well.
It’s only for qualified medical expenses –
If you use this account for a non-qualified expense it counts as regular income. You need to report this amount on your tax return. You will need to pay taxes on this amount. Additionally, there is
Disqualifications for Nevada HSA plans –
There are several things that might disqualify you from being HSA eligible. This includes federally provided coverages such as Medicaid, Medicare, and VA benefits. Also if you have access to a non-HSA plan through your spouse or if your spouse’s employer offers an FSA/HRA. This is not a complete list.
The HSA health plan needs to run all year –
If your HSA Qualified medical plan ends before December 1st and you contributed to a savings account, you may owe money to the IRS. The money contributed to the HSA is calculated by a pro-rated amount. It’s based on the number of months you were covered and whether you had individual or family coverage under the HSA Qualified health plan.
Final Notes
Overall an HSA Qualified health plan along with a savings account can be a great thing to use. Purchasing an HSA Qualified plan and not starting the savings account portion can be devastating. Here you’re only getting half of the benefit of owning an HSA plan, and this is where most people may get the wrong impression of HSA accounts.
