By Bill Bischoff
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?