Health Saving Accounts (HSAs)

(10/3/22)-As of June 30, HSA funds there were 28 million such funds, up from 17 million in 2017.

For 2023, the maximum HSA contribution is $7,750 for a family, and $3,850 for an individual, plus an additional $1,00 for a participant over 55 and older.

There is no tax on the money going into the account, and no tax on the withdrawals used for eligible medical expenses. The funds in the account grow tax free, and do not have to be withdrawn in the year the money is put into the account.

(3/22/21)- Although the deadline for filing your federal income tax has been extended to May 17 from April 15, there has not been any official word as to extending the deadline to make Health Savings Accounts (HSA) contributions has also been extended to May 15.

For 2020and 2021 the maximum contribution is $1,400 for an individual and $2,800 for family coverage. A person does not have to itemize personal deductions on a tax return to claim the HSA benefit. It is reported with “adjustments” that reduce taxable income.

The money in the account can be used for long-term care insurance premiums.

There were about 30 million HSA accounts at the end of 2020, according to Devenir, the consulting firm.

(11/17/20)-Unlike a flexible spending account (FSA), a high deductible Health Savings Account (HSA) is portable, and you can take it with you when you leave your employer.

The I.R.S. allows you to contribute to both an FSA and an HSA account.

{11/1/20)- There were an estimated 29 million Health Savings Accounts at mid-year, holding an estimated $73.5 billion, for an average balance of $2,500, according to the consulting firm of Devenir.

You can have both an H.S.A., and a Flexible Spending Account (F. S. A.).

Some employers contribute seed money to H.S. A. accounts, with the average being $572, according to the Kaiser Family Foundation.

(10/19/20)-The maximum contribution to an H, S. A. increases slightly next year to $3,600 for an individual and $7,200 for family coverage. Individuals over 55 can contribute an extra $1,000. The qualifying deductible amount for such plans is $1,400 for individuals and $2,800 for family.

(5/5/20)- The extension of the filing of the income tax deadline has been extended to July 15; and this in turn means you can still make a contribution for 2019 to your Health Savings Account up until that date also. You may contribute up to $3,500 for an individual, and $7,000 for a couple.

You now can use your H. S. A. account to buy non-prescription drugs under the terms of a recently changed ruling. The new rule also relaxed the ability to use telemedicine charges against your H.S.A. account. For 2020, your plan must have a deductible of at least $1,400 for an individual, or $2,800 for a family to qualify for an H.S.A.

At the end of 2019, there were more than 23 million H. S. A. holders holding about $66 billion, according to Devenir, a pension consulting firm.

(11/29/19)-  The money in a Health Savings Account (HSA) grows tax-free and need not be used to pay a medical bill in the year the expense occurred. When a withdrawal is made from a HSA account it is a tax-free transaction with no tax due for the withdrawal amount.

You can use your HSA for nonmedical expenses, but you will owe income tax on the amount withdrawn, and a 20% penalty if you are younger than 65. The medical expense used for a spouse’s medical treatment is a qualified withdrawal.

Qualified expenses include dental and vision care, premiums under Cobra and for all types of Medicare coverage except Medigap. It also includes a portion of long-term care insurance premiums and over-the-counter medications that you have a prescription for.

(11/9/19)-The number of Health Savings Accounts (HSA) accounts has grown from 6.2 million in 2011 to 26.3 million this past June, according to Devenir Research, a consulting firm. Data from Devenir shows that $10.2 billion was invested in HSA plans last year bringing the total to $43.5 billion.   

HSA contribution limits for 2020 are $3,350 for individuals with high deductible health plans and $7,100 for an individual with family coverage. The catch-up contribution for those over 55 years of age is an additional $1,000. You can contribute to an IRA account, 401(k) and an HSA account, and an employer can make matches to both plans.  

Contribution limits for 401(k) plans or IRAs are $19,500 and $6,000 respectively for 2020. Your contributions to H.S.A. plans are from pretax earnings without paying federal or state income tax. If the money is withdrawn for medical expenses, this money can be withdrawn tax free before retirement.                  

(10/15/17)- The latest figures from Devenir, a H.S.A. services firm, reported that the number of these accounts grew by 16% year-over-year, as of June, 2017, to 21 million. Assets held in the account grew by 23% to just under $43 billion.

Contributions to H.S.A. accounts can be deducted pretax from your paycheck; have interest or investment gains on the money is tax free, and withdrawals from the account are tax free, as long as the money is spent on eligible items.

The minimum deductible for H.S.A. accounts in 2017 is $1,300 for an individual and $2,600 for a family. You can set aside as much as $3,400 for an individual or $6,750 for a family in a given year. The H.S.A. account is portable so that you can take it with you if you leave the job. H.S.A. accounts are available to the self-employed.

(7/10/17)- A recent report from Morningstar  ranked 10 prominent Health Savings Accounts (HSAs) for their suitability for savers or investors. The accounts can be opened only by people who have high deductibles. As noted in our item dated 2/26/17 below, that amount is at least $1,300 for individuals and $2,600 for families in 2017.

The number of HSA accounts rose 20% to 20 million in 2016 from the prior year, according to Devenir, a consulting firm. The accounts hold nearly $37 billion

The Morningstar report ranked these accounts by comparing monthly maintenance fees, ease of spending for current medical expenses, and the menu of mutual funds being offered for people using them for investing.

The top HSAs for spending were the HSA Authority, Select Account and the Alliant Credit Union, none of which charge a monthly maintenance fee.. Bank of America came in last on this list, with a monthly fee of $4.50.

For investing, the top ranked firms were Health Equity, Optum Bank, the HSA Authority and the Bank of America.

(2/26/17)- For this year, the deductible to be eligible for a Health Savings Account (HSA) has to be at least $1,300 for individual coverage, and $2,600 for family coverage. An individual can put in as much as $3,400 (including any employer contribution), and families can deposit up to $6,750.into the plan

The money in the account can earn interest that is tax free, and the amount of the contribution is directly deducted from the individual’s income. Internal Revenue Service Publication 969 covers the applicable rules for H.S.A.s.

Devenir, a consulting firm, estimates that there are currently 20 million taxpayers enrolled in H.S.A. accounts.

(10/14/16)- Twenty nine percent of covered employees were enrolled in Health Savings Accounts (HSAs) this year, according to a survey from the Kaiser Family Foundation and the Health Research& Educational Trust (HRET), a nonprofit organization affiliated with the American Hospital Association. That’s an increase from the 24% last year and 20% in 2014.

About 84% of large employers will offer these high-deductible plans in 2017, according to a survey from the National Business Group on Health (NGBH), a nonprofit organization that keys in on employer covered health care.

An estimated 35% of large employers will offer only HSA high deductible plans, according to that same NGBH survey.

(9/14/15)- Contributions to H.S.A. accounts can be deducted from pretax income and they are tax-deductible even if you don’t itemize your deductions. Contributions to these accounts require the filing of a special tax form. The health insurance plan must have a deductible of $1,300 or higher for an individual in 2015 for it to be able to cover you in your account.

Withdrawals from H.S.A.s, if used for medical purposes are tax free, and balances may be carried from year to year. The maximum contribution for an individual in 2015 is $3,350, and $6,650 for a family. In 2016, that amount will remain at $3,350, while it will increase by $100 for a family

If you are 65 or older you can add an extra $1,000 a year to your account

(7/18/15)- There were nearly 14 million health savings accounts on the books, as of the end of 2014, according to Devenir, a data firm in Minneapolis, that hold over $24 billion in total in HSA accounts. Under a change enacted with the Affordable Care Act of 2010, most over-the-counter medications or pain-relievers are HSA eligible only if you get a prescription for them from your physician.

Sunscreen and contact lens solutions are eligible for purchase without a prescription, with your HSA funds.

The maximum contribution for an individual in 2015 to your health-savings-account is $3,350, while for families it is $6,650.

(2/21/15)- At age 65, you are eligible to make withdrawals from a health savings account for nonmedical expenses without the usual 20% penalty. The money is taxable, but you have benefited from the fact that it had been in a tax deferred plan for years.

The results of a survey of 27.000 people by the National Health Interview Survey showed that by early 2014 some 36% of the population was being offered Health Saving Accounts (HSAs), up from 22.5% of the respondents in 2009, when these high deductible plans were first being offered by employers.

(9/13/14)- In 2015, individuals will be allowed to contribute up to $3,350 in pretax dollars, or $6,650 for families into H.S. A. accounts. The deductible in 2015 must exceed $1,300 for a single individual or $2,600 for a family.

The money grows tax free and can be used to pay out-of-pocket medical expenses. Employers have the option of making contributions to their employee’s plans and a Kaiser Family Foundation study estimated that about 20% of the employers offered such plans to their employees in 2013

(6/2/14)- At age 55, you are eligible to make catch-up contributions of up to $1,000 in 2014 to a health-savings account (HSA). At age 65 you are eligible to make withdrawals from health savings accounts for nonmedical expenses, without the usual 20% penalty.

The money withdrawn is taxable, similar to a distribution made from an IRA account.

(2/18/14)- Last year there was a cutback on the maximum amount that an employee can contribute to his flexible savings account (FSA) from $5,000 a year to $2,500, if the firm had such accounts. The yearly contribution falls under the “use it or lose it” rule, meaning if not used in the year the contribution is made, the unspent portion is lost.

It looks like that will be changed next year, and any unspent portion of a FSA will be able to be rolled into the following years.

On the other hand the maximum that can be put into a Health Savings Account (HSA) account in 2014 is $6,550, and any unspent portion of that money can be rolled into following years. Please keep in mind that this type of account must have a high deductible to qualify for the tax savings.

(10/14/13)- As of June 2013, there were about nine million health savings accounts, with about $18 billion in assets, according to the Minneapolis based consulting firm Devenir, which provides investment plans for the accounts.

For 2014, individuals can contribute up to $3,300 to a plan, and families up to $6,650. The plan must have a deductible of at least $1,250 for an individual, and $2,500 for a family. You can set up an account even if your employer does not offer one, or if you buy your insurance privately.

Any money that is unused at the end of the year can be rolled into the following year or years. If your account was opened through one of the options under your employer’s plan, it stays with you when you leave the job.

Funds contributed to the account are tax-free, any interest or gains earned in the account are tax free, and any withdrawals from the account are tax-free, as long as it is used for medical purposes. Over-the-counter medications are not covered under health savings accounts.

(9/20/13)- A PriceWaterhouseCoopers survey released in June found 17% of employers now offer high deductible health savings plans as their only option, up from 13% in 2012.

One of the questions that will be answered once the Obama care health exchanges start enrolling participants into health insurance plan, is if employees will abandon HSA  accounts for coverage under the new law.

(9/20/12)- The latest survey results from the Kaiser Family Foundation, that were published in a recent edition of the journal Health Affairs, estimated that about one-half of workers covered by employers health-care coverage now have a deductible of at least $1,000 for individual policies. In 2007, only about 21% of workers had deductibles that high.

(10/4/11- Carl McDonald, an analyst at Citigroup Investment Research estimated, in a recent report of his that 17% of the eligible workers had enrolled in health savings accounts (HSA). This figure was up from the estimated 13% in 2010, and 8% in 2009.

It is estimated that about 23% of employees offered health savings account plans with a deductible of at least $1,200 for a single person and $2,400 for a family.

(5/15/11)- It is interesting to note that employers are increasing the amount of the deductible for their employees even excluding Health Savings Accounts. According to a recent survey from the Kaiser Family Foundation, a nonprofit research group, about 10% of the employers in 2010 had a deductible of $2,000 in 2010, versus only 5% that amount of deductible in 2008.

(3/3/11)- The results of a survey of data collected by Devenir, an investment firm that specializes in providing investment options for HSAs indicate that this market continues to grow rapidly

The siurvey data was requested from the top 30 custodians in this market for the calendar year ended December 31, 2010.

The results of the survey showed that the total number of HSA accounts rose to 6.2 million with assets totaling almost $10.1 billion, a year over year increase of 27% in accounts and 41% in assets.

The average account balance grew almost 11% in 2010 to $1,627.

(1/22/11)- For the calendar year 2011 the maximum deductible contribution for Health Savings Accounts (HSA) is $3,050 for an individual, or $6,150 if you are covering your family. If you are 55 or older, you can make an extra $1,000 contribution, and there is no maximum income restriction to be able to set up such a plan. Your employer can set up matching amounts into your account

You can't open an HSA account unless you have health insurance with an annual deductible of at least $1,200 this year for individual coverage, and $2,400 for family coverage

The expense limits, which includes deductibles and co-pays are $5,950 for an individual and $11,900 for a family.

(8/31/10)- More than 10 million people are enrolled in high-deductible health plans linked to health savings accounts (HSA), up from 6.1 million in 2008, according to a recent survey by America's Health Insurance Plans, an industry trade group.

To open a health savings account, you must be enrolled in a qualified health insurance plan with a deductible of at least $1,200 for an individual or $2,400 for a family.

For 2010, the maximum that a single person can contribute to the account is $3,050, or $6,150 for a family. The balances in the account roll over from year to year, and travel with an employee from job to job.

Earnings in the account are tax free, and no taxes are paid upon withdrawal of the money from the account if used for qualified medical purposes.

(3/30/10)- The recently enacted health-care reform legislation that was signed by President Obama seems to have brought HSA accounts back into the limelight as a way for consumers to help reduce their health-care costs.

The law, which was enacted in 2004, enables a participant to pay no federal income taxes on the money deposited into the account, allows the owner of the account to have the funds grow tax-free therein, and there is no tax on it when you withdraw it for qualified expenses.

You can put in up to $3,050 in 2010 for an individual, or $6,150 if you are covering your family. If you are 55 or older, you can make an extra $1,000 contribution, and there is no maximum income restriction to be able to set up such a plan. Your employer can set up matching amounts into your account

You can't open an HSA account unless you have health insurance with an annual deductible of at least $1,200 this year for individual coverage, and $2,400 for family coverage.

Unlike a flexible savings account, the money in the plan does not evaporate if you do not use it up in any given year. The amount you can put in a tax-free flexible spending account (FSA) will be limited to $2,500 a year starting in 2013. There is currently no legal cap on the amount that an employee can put into his/her flexible spending account, although many employers impose their own limits

As you can imagine, an HSA account may be more advisable for a younger, healthier individual or family, but there may be a huge downside to the whole health-care cost equation. If you have the younger, healthier employees in a company's health plan joining an HSA account, it will mean that the costs may go up for those who are left in the plan.

(7/28/09)- Kelly Greene's "Ask Encore" column in the Wall Street Journal recently had the answer to an interesting question regarding contributions to HSA accounts after an individual turns 65 years of age.

In the answer that was given by JoAnn Laing, head of Information Strategies Inc. in Ridgefield, N.J., which runs, she stated that once you sign up for Medicare, you can no longer contribute to your HSA account.

If you want to continue to contribute to your Health Savings Account you should not sign up for any parts (A ,B ,D or supplemental) of Medicare You are allowed to delay enrollment in Part A if you also delay your Social Security payments after 65.

(12/26/08)- We at therubins recently received the following e-mail from David McAtee, who as you can see is associated with

"On Mon, 15 Dec 2008 14:32:09 -0800
"David McAtee" <> wrote:
I just wanted to share with you a great resource for information on Health Savings Accounts - . The site currently has nearly 400 pages of information, tools and resources to
assist consumers as they consider the HSA approach to health insurance. In addition to real-time quotes on HSA-qualified, High
Deductible Health Plans, the site also contains a searchable database with approximately 350 financial institutions offering Health Savings Accounts.
I think your readers will find it useful.
All the best,
David McAtee <
888-HSA-0411 (toll free)
805-649-2008 (direct)"

(11/18/08)- Health Savings Accounts were first introduced to employees in their health care menu choices in 2002. Very few employees opted to take this choice because of the fact that the deductible was set at a very high amount. Yes, this in turn meant that the premiums for this type of policy was much lower than it was for the other choices available on the menu, but because the cost is incurred immediately, most workers did not select this option.

Now we fast-forward to the present where hard economic times are causing employers to cut back on the options available to their employees on their offered health care menus. Over 100 large companies offered the high deductible plans as the only choice available to their employees. Yes on the one hand, if the deductible amount exceeds $1,100 for an individual, it would then allow that individual to have a Health Savings Account, but on the other hand, fewer and fewer employees are making any voluntary contributions into that account.

According to Steve Davis, managing editor of Consumer-Directed Care, a trade newsletter, of the 12 million people covered by the high-deductible plans, less than one-fourth of them have funds actually in the plan. Since there are about 158 million people covered by employer sponsored plans, this represents only 7.5% of the enrollment.

Effective November 1, 2008 there are 1.8 million individuals who are in Medicare Advantage plans through their employers plan options.

According to a survey that was done by the Kaiser Family Foundation and the Health Research and Education Trust, about one in four companies with high-deductible plans make no contribution to the employee's account.

(7/24//08)- Anyone can open an HSA if they have an eligible high-deductible health-insurance plan, and if they are not enrolled in Medicare or another traditional plan such as a HMO. For the year 2008, high deductible is defined as at least $1,100 for an individual, and out-of-pocket amount of $5,600. for families, the numbers are $2,200 and $11,200 respectively.

As of January of this year there were 6.1 million people eligible to join a HAS plan, up from 438,000 in 2004, according to America's Health Insurance Plans, a Washington, D.C. trade group. According to a recent report from the Government Accounting Office, the investigative branch of Congress, over 40% of those eligible have not joined.

Over two-thirds of employers offering high-deductible plans also make contributions to their workers. According to GAO figures, large employers contributed $626 on average to individual HSA plans last year.

Total contributions can not exceed an annual limit, which is adjusted each year. For this year, the amount is $2,900 for an individual and $5,800 for a family.

You have until April 15th of the following year to make contributions, and you can open the account up until April 15th, so in that respect it is similar to the date limitations for IRA plans. Once enrolled in the plan for a particular year, you must stay in that plan for the calendar year.

(1/8/08)- If both a husband and wife are over 65 years of age, and each has a separate HSA with a family-coverage high-deductible health plan, the total contribution that they can make to their HSA account is $7,600 in 2008. You arrive at this figure by adding two $900 catch-ups, since they are both over 55 years of age to the $5,800 figure ($2,900 for an individual) which is the limitation for 2008 for HSA contributions..

For individuals under 65 who are not disabled, any withdrawal from the HSA for a purpose other than qualified medical expense will be taxed as income and subject to a 10% penalty. Individuals over 65 don't have to pay the penalty, but the withdrawal will still be taxed as income, according to the Treasury Department.

(9/14/07)- According to a recent telephone survey of public and private employers, which ended in May, Health Savings Accounts (HSA) are not really catching on in the business world. The survey was conducted by the Kaiser Family Foundation and the Health Research and Educational Trust, and it queried 3,078 employers, but the results were based on the 1,997 that responded to the full survey.

Five percent of all covered employees, or 3.8 million workers were enrolled in HSA plans, compared to the 4% that were covered in 2006. Almost one in five large employers currently offer some sore of health saving option, combined with high-deductible insurance, and only 2% of the employers who do not offer such a plan said that they intended to offer it in the future.

(7/15/07)- The following is a copy of an email that we received from one of our viewers, Ashley Martinez. Many thanks Ashley.

Hello Mssrs Rubins,
Great site. You may wish to include
Health Savings Accounts Information

This is a nonprofit site about health savings accounts, which are anew thing recently approved by the government for letting people save for their medical expenses. The site explains the pros and cons of these accounts.
Ashley Martinez

(6/20/07)- Enrollment figures are now showing a slowing of growth for as accounts, and also a growing dissatisfaction among members of such plans. The number of U.S. workers enrolled in such plans through their jobs (excluding dependents and those in firms with fewer than three workers) grew to 2.7 million in 2006 from 2.4 million in 2005, according to the Kaiser Family Foundation.

Forty percent of employees in HSA plans say that it was the only choice available from their employer. Only 19% of employees choose this type of account over the other types of coverage being offered by their employers.

HSA plans are further exacerbating a major problem in that it is the healthier younger employees who are choosing this type of plan, thus leaving the older and sicker employees in the other type plans available from their employers.

(1/23/06)- Congress enacted and the president signed legislation that would allow tax-free contributions of up to $2,850 annually for an individual and $5,650 for a family into HSA accounts in 2007. The law is expected to cost the Treasury $712 million over 10 years.

The new law also allows you to make a one-time "catch-up" contribution to an HSA from an IRA of up to $800 if you are 55 or older. This in effect means that for people over 55 the maximum contribution to HSA accounts is increased to $3,650 for individuals and $6,450 for families. The rollover from the IRA to the Health Savings Account must be done directly from trustee-to-trustee without the individual receiving the amount and then passing it on themselves.

You do not have to have earned income to contribute to an HSA account. You can keep adding money to your HSA account until you start your Medicare coverage.

If your spouse is the beneficiary of your HSA account, the spouse can set up a "survival" HSA account upon your death. If you designate someone besides your spouse as your beneficiary, the account ceases upon your death and the beneficiary would owe taxes on the value of the account in the year of your death.

If your estate is the beneficiary of your HSA account, the value has to be included in your final tax return for the year that you passed away.

(11/26/06)- Starting January 1 if you expect to open an HSA, your insurance will need a minimum deductible of $1,100 for individuals and $2,200 for families. The government generally won't let individuals deposit more than the lesser amount of $2,850 or the insurance plan's deductible; families are limited to $5,650 or the deductible.

Those who make deposits on their own can subtract them from gross income on their tax returns, whether they itemize deductions or not. Anyone can participate regardless of what income level you are at. The assets in the account can continue to accumulate and grow until you have to spend it on health related costs.

More and more banks are now offering HSA accounts so that the cost for set up fees and annual fees are being sharply reduced. Some banks are actually setting up these accounts for free. The total number of accounts by year-end is expected to grow to 3.6 million holding $5 billion in combined deposits according to Information Strategies.

This is about triple the 1.1 million accounts that were open as of 2005 with total deposits of $1.2 billion that year.

If you withdraw money before you are 65 from an HSA account for other than a health related expense you will penalized by the IRS for such a withdrawal, although that is not the case for withdrawals made after you are 65.

(10/3/06)- A U.S. House tax committee has passed a bill which will expand health savings accounts. The Health Opportunity Patient Empowerment Act of 2006 was sponsored by Eric Cantor, (Rep.-Va.) and Paul Ryan (Rep.-Wis.), and passed by a vote of 24-14.

Congress has adjourned, so that congressional representatives can go home for electioneering purposes. This bill is much more modest than what the president had hoped for in regards to expanding the attractiveness of HSA accounts.

The proposed bill has a 10-year cost of about $1 billion in reduced tax revenue, according to Congress' Joint Committee on Taxation. The bill would simplify the formula for HSA contribution limits by setting then at indexed amounts, which currently are $2,700 for singles and $5,450 for families

The legislation would allow a one-time transfer of funds from taxpayers' IRAs, within the contribution limits, to fund an HSA.

(7/31/06)- One of our viewers recently pointed out to us, that there is very little publicity given to the fact that people who are 55 or older can add on as much as $700 extra to the $2,700 individual limit, or $5,450 yearly that you can put into your HSA account.

To find out more about the requirements for HSA go to either or .

(6/21/06)- In order to open a health savings account, you must have a "high deductible" health insurance policy that is HSA-eligible. The deductible must be at least $1,050 for an individual or $2,100 for a family. An HSA -eligible plan generally is not allowed to pay for any medical expenses other than preventive care, such as a physical or a mammogram. Many consumers are finding that the health-saving eligible policies have much higher premiums than do other high deductible health plans.

According to data from the America's Health Insurance Plans, a trade group, nearly 3.2 million people have the insurance plans that qualify them to open an HSA, up from one million a year earlier. It is estimated that between 50% to 60% of people who have the plans have opened an account. More and more larger corporations are offering HSA-linked insurance plans to their employees.

An HSA plan can't require an enrollee in a single-person plan to spend more than$5,250 a year on covered expenses (or $10,500 for a family), including the deductible and any other out-of-pocket costs, such as co-payments, that are required once the deductible has been met.

(3/15/06)- The AHIP released the results of its survey that showed that lower-premium, high-deductible health insurance plans (HDHP) offered in conjunction with HSAs covered 3,168,000 people in January 2006, more than triple the 1,031,000 surveyed in its March 2005 survey.

About 1/3rd reflected new growth in the market, and the rest came from a shift in product for existing customers. About 31% of the new enrollees in HDHP plans were previously uninsured.

Of the small employers who enrolled, companies that previously did not offer coverage purchased 33% of the policies. Over 90% of the enrollees in HSA plans are in preferred provider organization (PPO) products with both in-network and out-of-network coverage.

(2/12/06)- About 3 million people have taken out high-deductible insurance that qualifies them for HSA accounts according to the American Health Insurance Plans, the industry's trade group. Only about one million of those who have taken out the high deductible plan have opted for HSA accounts, according to the group.

An employer's total cost for each employee in an HSA is generally lower than for a worker in a traditional health plan. For example, employers typically pay $3,284 for a single employee in a traditional plan; covering the same employee in a high-deductible plan would cost $2,850, according to the Kaiser Family Foundation.

Employers have to pay a variety of payroll taxes on cash income their employees earn; these taxes fund Social Security, Medicare and state and federal unemployment programs. Under at least some of the HSA arrangements employers can skip most of those taxes on employee contributions to the account, bringing the employer savings as much as 7% to 10%.

President Bush has indicated that he will propose increasing the maximum amount of annual contributions to an HSA account above the present limits of $2,700 for an individual and $5,450 for a family in 2006.

Some economists are now saying that the HSA accounts are in some ways a device for employers to shift their health care costs away from themselves in a similar fashion as to what occurred with 401(k) plans replacing traditional defined- benefit pension plans.

(1/29/06)- Only 2.4 million people of the total 195 million who have private health coverage are using high-deductible savings plans. Many health experts have stated that HSAs are the wave of the future, and will be instrumental in holding down health costs for the average American. It may hold down health costs in the short run, but it is going to lead to a far more serious problem for older and less healthy individuals down the road.

HSAs were created in 2003 for individuals who were willing to accept higher deductible health policies in return for the lower premium that it would cost them. This year the deductible, or the amount that the insured individual must pay out him or her self, is set at $1,050 for individuals and $2,100 for a family. The maximum allowable deductible is set at $2,700 for individuals, and $5,450 for a family. Some employers are contributing some funds into their employees' accounts, because in effect, it is a way for them to reduce their own health care expenses.

President Bush has made H.S.A.s a central point in his battle to hold down rising health costs. He hopes to expand the limits now in place for these accounts and we will follow this issue closely for you.

The limit that an individual can spend out-of-pocket is $5,250, and $10,500 for a family. The New York Times recently had an article written by Eric Dash entitled: "Wall Street Senses Opportunities In Health Care Savings Accounts". According to the article banks, credit unions and money management firms are becoming more heavily involved in this area.

The money in the plan can be used for medical, dental and vision expenses and also a portion of qualified premiums can be used for long-term-care insurance. The plan holder can invest the remaining funds in stocks, bonds or mutual funds. The money grows tax-free in the account until it is withdrawn after the individual reaches 65 years of age. If the individual removes some of the money in the plan before reaching 65 there will be a penalty imposed on that individual. There is a tax assessed on the plan holder when removing the monies in the plan after reaching the age of 65.

The banks make a fee every time the individual swipes his H.S.A card at the doctor's office. As the plans grow in size it becomes more and more lucrative for the banks, money managers and brokers to handle these accounts.

This type of plan is different than the older health reimbursement accounts, where employers would contribute to an employee's account, which the employee could draw upon for health expenses. Once the employee left the firm however he did not take the account with him or herself i.e. there was no portability. The money that is left in these accounts went back to the employer. The new H.S.A. accounts do have portability, so that when an employee leaves a firm he can take the account with him or herself.

Most of these firms charge $50 to $75 to set up the account, and they will collect a yearly fee for maintaining and servicing the accounts. Two years ago there was not one major bank involved in this area, while today there are more than 200 financial service companies involved in these plans. The industry has established a lobbying trade group called the H.S. A. Council, and is spending millions of dollars to advertise this new type of plan.

There are basically two reasons why we at therubins find weakness with the new H.S.A plans. In the first place individuals will be less prone to have preventive examinations for themselves when they are paying for it themselves. More importantly however is the fact that it will be the younger, healthier individuals who will opt for the lower paying premium H.S.A. plans.

Older and sicker individuals will therefore be the ones left holding the bag, since the pool of individuals who are in the regular health plans will be a "higher expense, riskier health group" without the younger members that would normally balance out the group. It is one of those times where taking a shortcut to lower health costs for the individual will lead to more expensive costs down the road.

We at therubins welcome any comments that you may have on this issue.

(12/17/05)- Thirty-one of the nation's 39 locally operated Blue Cross and Blue Shield companies have agreed to charter a joint bank so that they may directly capture more of their 70 million health plan member's Health Savings Accounts business. The bank is expected to be operational in mid-to-late 2006.

It is estimated that about 400,000 members of the Blue Cross and Blue Shield members have health savings accounts. In having their own bank the consortium hopes to reduce its operational costs, and thereby pass the savings on to the holders of the HSA accounts. None of the Blue plans have committed to exclusive use of the new proposed bank so its is unclear as to how that bank can become profitable in today's competitive marketplace.

Among major health insurers only UnitedHealth Group Inc. has chosen to form its own bank, called Exante, which has more than $34 million in deposits. Its account holders get a debit card for health expenses, and, starting in January, they will have a variety of mutual-fund investment choices.

(11/30/05)- According to the results of a survey of 2,999 employers done by Mercer Health & Benefits about 22% of the country's largest employers offered Health Savings Accounts to their employees this coming year. On the other side of the ledger only 2% of employers with fewer than 500 workers will offer them.

Unfortunately the results of the survey also indicated that more and more employers are discontinuing health-care coverage for their employees because of the growing expense involved. The percentage of employers with fewer than 50 employees offering health-care coverage dropped to 58% in 2005 from 63% in 2003.

(8/19/05)- Under federal rules, HSA holders can contribute up to $2,650 for individuals or $5,250 for families, or the amount of their deductible, whichever is less. Money saved in the account can be used for non-medical purposes, but if it is, it will be taxed as income. If such use occurs before age 65, there will be a 10% penalty, unless the holder is disable. The employer can contribute as much as the deductible amount to the plan also.

According to America's Health Insurance Plans, an insurance trade group, about 14% of consumers nationwide with this HSA plan had obtained it through small-business employers.

(7/29/05)- UnitedHealth Group, one of the largest health insurers has set up its own bank, called Exanta, to offer health savings accounts. At last count the company said that over 44,000 accounts have been set up so far, with an average monthly deposit of $862, including money contributed by both employers and employees. Exanta Bank pays as much as 4% on its accounts and comes with a MasterCard debit card.

According to a survey that was conducted by Watson Wyatt, a human resource firm, 8% of the large employers in this country offers health savings accounts, and up to 18% of the large companies intends to offer it in 2006. Wyatt polled 555 employers with at least 1,000 workers in the survey.

(6/21/05)- In a recent survey of more than 2,500 people that was done by McKinsey & Co., it was found that participants in health saving accounts got annual check-ups, basic lab tests, prostate screenings and mammograms at an equal or higher rate than those in traditional type health plans.

Individuals who were in health savings accounts were twice as likely to inquire about drug costs than those in the traditional plans. The survey also found however that only 44% of health savings plan members were as satisfied as they had been with their previous plans Costs were one of the factors for the unhappiness, but the added burdens involved with the HSA plans was another major factor for the unhappiness.

(5/30/05)- It has been reported that at least 5 insurance companies have lowered, or are in the midst of lowering, premiums on existing HSA-eligible insurance products. The companies include PerfectHealth Insurance Co. of Staten Island, N.Y.; PacifiCare Health Systems Inc. of Cypress, CA; American Community Mutual Insurance Co., Livonia, Mich.; World Insurance Co. in Omaha, Neb a unit of American Republic Insurance Co.; and Assurant Inc. of New York.

At this point it is too early to tell if these rate decreases represent a significant trend that will continue to grow but it may be an indication that "consumer directed-health care" may be helping to restrict burgeoning health-care costs. If the premiums continue to decrease it may induce even more people to opt for the HSA which in turn means that costs for premiums may continue to be cut even further.

(5/22/05)-If you are looking for some helpful Web sites in connection with possibly opening an HSA account more and more of them are popping up these days.

The following is an email that we received recently at therubins from Jim Snyder of Great Lakes HSA, a Cleveland, Ohio based full-service HSA administration company

Allan, only has 15 HSA providers on its website and much of the information on is out of date. Regardless, check out - it contains over 125 HSA providers across the country. More importantly, it lists the fees related to each account!


HSAInsider provides information about more than 85 insurers and 65 account providers ( ).HSAFinder collects information from more than 30 insurers and more than 75 account providers ( ).

(4/8/05)-According to the latest figures the typical HSA charges start-up fees of $20 to $35 and monthly administration fees of from $2 to $5. People can reduce costs by buying an HSA through their employer. About 8% of employers offer these plans, and an additional 18% plan to offer them in 2006 according to a recent study by Watson Wyatt Worldwide and the National Business Group on Health. Some employers also match employeee contributions to the HSA account, up to a certain amount. There is a site, that gives you a list of insurers that sell policies in your state.

(1/29/05)-As of September there were only about 438,000 consumers with health insurance policies that could cover HSAs, according to an America's Health Insurance Plans (AHIP), an insurance-industry trade association survey. About 91,500 individuals with HSA-eligible policies got them through employers. About 12,700 of those consumers were employed by companies with more than 50 workers.

More than 40 additional insurers have started marketing HAS-eligible plans since September, according to survey by AHIP. In a survey done by Hewitt Associates, a benefits-consulting firm only 3 % of the 500 large companies that were questioned indicated that they would offer the plans this year.

(12/24/04)-Under the new Medicare bill enacted by Congress in December 2003 Health Savings Accounts (HSA) were set up in an another attempt to help with the ever-escalating medical costs facing most Americans. The Treasury Department in July 2004 issued detailed guidelines on how the money in the accounts can be used. To see what types of medical expenses qualify to be used under an HSA plan go to Publication 502 on the IRS's Web site at .

Please be alert to the fact that even though this publications says that over-the-counter medications aren't eligible, they are according to the Treasury Department guidelines.

To open an HSA account which are available through banks working with insurers you must have an HSA eligible insurance policy with a deductible of at least $1,000 for an individual, or at least $2,000 for families. Like any other new product however there is a lot of confusion as to how the program works.

Do not confuse an HSA account with an FSA account (Flexible Spending Account). An employee can use an FSA account even though the bill may be more than the amount of money presently in the account. With an HSA account you can only use the amount of money that is actually in there at the time the expense is charged. As more money comes into the account as it is withheld from your paycheck, you will be able to draw down that money for the past expense. Remember that your employer makes his contribution on a paycheck-by-paycheck basis.

Even though the policy has a deductible that must be met before the insurance starts to kick in, the policyholder is entitled to any of the discounts that may have been negotiated between the doctor and the insurance company holding your policy. In the case of HSAs the doctor informs the insurer of the charges and then the insurer sends the patient a statement explaining how much the patient owes. Thus you should not pay the doctor until you receive the statement from your insurer showing how much you owe.

Some insurers, like UnitedHealthcare, are already working on a system that allows the consumer to authorize the insurer to deduct the amount directly from the HSA to pay the bill. If you make a mistake and use the account for an item that is not eligible to be used in these type accounts you will have to include that item on your income tax.

(10/22/04)-Employers and workers have been very slow to accept the Health Savings Accounts as an alternative to conventional health insurance. The UnitedHealth Group, the nation's largest health insurer, which represents employers who cover more than 18 million workers, estimates that only about 150,000 of those employees chose health savings accounts for 2005. Aetna, the second largest underwriter of employer health insurance plans, said that only 39 of the hundreds of employers it covers are offering these plans in 2005.

A survey recently jointly conducted by the Kaiser Family Foundation and the Health Research and Educational Trust found that only 6% of all companies said that they would be likely to offer some type of high-deductible plan linked to a savings account in the next two years. Employers with 5,000 or more employees were more likely to offer such plan options, since only 22% responded that they were likely to offer such plans within the next two years.

The House has passed and sent on to the Senate a bill that would allow employees with flexible spending account (FSAs) to roll over up to $500 in unused balance to the following year, or into an HSA. The Treasury Department has issued a rule that allows individuals to contribute to an HSA while also covered by the following spending accounts that reimburse medical expenses that are restricted to certain limited purposes

Beginning January 1, 2004 individuals, their employers and family members under the age of 65 can make contributions to these HSA. A person can make tax-deductible contributions to an HSA even if he/she does not itemize deductions on his tax return. A company can make contributions that aren't taxed to either the employer or the worker. The contributions are treated as "employer-provided coverage for medical expenses" under an accident or health plan, and are excludable from the employee's gross income. The contributions are not subject to the FICA, Federal Unemployment Tax Act or the Railroad Contributions Tax Act.

The accounts can be used to pay unreimbursed medical expenses, retiree health insurance, and for prescription drugs. Unused funds in the account can continue to grow over the years and need not be used up by year-end, as is the case for Flexible Spending Accounts. The funds can grow in the account tax deferred and there are no taxes on any investment growth while the money remains in the account. No federal tax is charged if the money is withdrawn for medical needs.

To start an HSA an individual can enroll through his/her employer's health plan, if such an option is available, or enroll in such a plan on their own. Aetna Inc. says it has signed 25 large employers and over 200 small employers, and is rolling out a plan for individuals. According to the Treasury guidelines the HSA money can be invested into any investment that has been approved for IRA investing. The following is an example of how the cash flow works with an account:

  1. Employee and employer pay monthly premiums to a high-deductible health plan.
  2. An individual contributes to his/her HSA through a pretax payroll deduction that can be up to the amount of the deductible in the health plan. The employer can also elect to contribute to the employee's HAS.
  3. Assume the member incurs a $10,000 medical bill. In our example assume that he/she has a health plan with a $1,000 deductible and 20% coinsurance.
  4. The funds in the HSA account earn investment income free of tax.
  5. In our example the individual will pay the $1,000 deductible out of his HSA account.
  6. The individual pays $1,800 out-of-pocket co-insurance.
  7. The health plan pays the $7,200 due on the bill.

Unused money that is not withdrawn from the HSA plan for a health related expenditure grows tax free in the account and can be carried over from year-to-year. When the plan holder achieves the age of 65, the account holder can use the funds tax-free for Medicare premiums and co-pays, or withdraw it for non-medical reasons and pays only income tax with no penalty for the withdrawal. If the money is withdrawn for a non-medical reason before the age of 65, a 10% penalty is imposed in addition to the tax, which is due for the withdrawal.

To be eligible, taxpayers have to be covered under a health plan with a high deductible of at least $1, 000 for individuals and $2,000 for families. The plan must also have a high cap on annual out-of-pocket expenses, $5,000 for individuals and $10,000 for families.

The law lets taxpayers save as much as 100% of a health-plan deductible annually, to a maximum of $2,600 for self-only policies and $5,150 for family policies, or the amount of the health plans deductible, whichever is lower. An employer can contribute a portion of that money. In addition, it allows people aged 55 or older to make additional tax-free "catch up" contributions of as much as $1,000 a year.

Individuals can set up a HSA at a bank, insurance firm or other designated trustee and custodian. A list of eligible "trustees" to administer the HSA accounts can be found at, which is managed by the HSA Coalition, a Washington nonprofit organization. The HSA can be used to pay for acupuncture

The Office of Personnel Management announced that the federal government would offer its more than 3 million employees and their families the new type of Health Savings Accounts that were created by the Medicare Prescription Drug Law of 2003. The plan will not be offered to retired federal workers who are eligible for Medicare.

Aetna Insurance will take the lead in providing the insurance and administering the plans for federal employees in 32 states and the District of Columbia. Seventeen other insurance companies will offer similar plans to federal employees including Congressmen and judges under the Federal Employees Health Benefit Plan.

Critics object to the savings plans since they will be attractive to only the healthiest of individuals who will be drawn to them, which in turn will result in higher health premiums for those who are not as healthy. Under the Aetna plan federal employees in New York would pay $83.27 for individuals and $191.53 for families. The government would bear most of the cost, contributing $2,998 a year for individuals and $6,895 for families.

Aetna said it would deposit $1,250 for individuals and $2,500 for families in each of the health savings accounts. The workers would have these funds available to be used for their accounts each year and would be able to rollover any unused amounts into the later years. Many critics object to the federal government using the health savings account system, since federal employees are among the best-protected health insurance group in the country.


Allan Rubin
updated October 3, 2022

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