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Popularity of Health Savings Accounts Is Rising

Proponents of government health care will not be happy to learn that Health Savings Accounts (HSAs) have apparently become increasingly popular the last few years. This is according to a new report by the Employee Benefit Research Institute (EBRI).

In 2010, the EBRI says there was a total of $7.7 billion in HSAs and employer-sponsored health reimbursement arrangements (HRAs), spread across 5.7 million accounts. Those numbers are way up from 2006 when there was only $835 million in 1.2 million accounts. In 2006, account balances averaged only $696, but they averaged a much-more-robust $1,355 in 2010. Unfortunately, the EBRI report doesn’t distinguish between HSAs and HRAs, but it’s probably safe to assume the popularity of both has been spiking.

Here’s why this is so interesting: Opening up an HSA is the ultimate expression of taking responsibility for your own health care costs instead of relying on an employer or the government.

Plus, HSAs have tax advantages. For 2011, you can make a deductible HSA contribution of up to $3,050 if you have self-only coverage or up to $6,150 if you have family coverage (defined as anything other than self-only). Deductions are not phased out for those with high incomes, and you don’t have to itemize to benefit. You can take federal-income-tax-free HSA withdrawals to cover qualified out-of-pocket medical costs.

However, you must have a qualifying high-deductible health insurance policy (and you can’t carry any other general health coverage) to be eligible for the tax-saving HSA contribution privilege. For 2011, a high-deductible policy is defined as one with a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage (that may sound high, but a 2010 Mercer survey showed that 2011 deductibles on employer-offered insurance plans would rise, yet again, often to $2,150 or more for families). For 2011, qualifying policies can have out-of-pocket limits of up to $5,950 for self-only coverage or $11,900 for family coverage.

If the whole HSA deal strikes you as something the average Democrat in Washington would absolutely hate, you’re right. When the Dems controlled Congress in 2009 and 2010, there were noises about outlawing HSAs, and I was very surprised that last year’s health care legislation didn’t do it. Now it appears HSAs may be around for a while. That’s a good thing in my opinion.

Readers, do you use an HSA? If not, are you ready to consider the idea?


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    • I have had an HSA for the last 3 years and last year I had surgery to correct a breathing problem. My comparison shopping was easy. I went overseas to a John’s Hopkins hospital in Istanbul and saved about $6,000 on the procedure. My HSA covered the deductible and some of the co-insurance and my employer covered the travel. Its such a no brainer.

      If you need major surgery go to a Joint Commission Accredited hospital in Turkey, Thailand, Singapore, Germany or Costa Rica. You’ll save 40-80% and likely receive better care than in America.

    • Have had one for four years. Despite having three young kids and plenty of medical bills, we’be saved money EVERY YEAR. It’s very simple. You can pay a higher premium, give that money to your insurance company, and never see it again, or pay a lower premium, keep the money and have it grow tax free.

      Meanwhile the deductible gets you THINKING. Urgent care instead of ER. Generic vs prescription. Doc, what’s this going to cost and are there alternatives? It IS absurd to think of medicine like shopping. But not as absurd to just go along imagining the system is smarter than you are.

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  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at thetaxblog@dowjones.com.