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Maximum HSA Contribution Amounts For 2010

By Richard Day

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Published: 08Nov2009
Word count: 587
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New Contribution Limits
The Internal Revenue Service has announced the maximum contributions that people insured under a Health Savings Account (HSA) plan can make. The maximum amounts will increase, and the minimum deductible amounts will also increase.

The maximum contribution that can be made to an HSA (the Health Savings Account that you have at a bank) in 2010 for insured individuals with single coverage will be $3,050, up from $3,000 in 2009. The maximum HSA contribution for those with family coverage will rise to $6,150, up from $5,950.

New Maximum Deductible Limits
Many people will be happy to hear that the maximum deductibles will rise to $5,950 for single insured individuals up from $5,800 this year. For a family, the maximum deductible will be $11,900 up from $11,600 in 2009.

New Minimum Deductible Limits
The minimum deductible of the high deductible health plan will increase to $1,200 for single coverage and $2,400 for family coverage. In 2009, the current minimum deductibles are $1,150 for single coverage and $2,300 for family coverage.

How Health Savings Account Type Plans Work
Without a doubt, high deductible health plan, linked with the Health Savings Account, is the least expensive way to purchase major medical coverage. The savings are in the order of almost 50%.

How can this be?
First, the high deductible health plan is less expensive, but secondly, you get to contribute money to your own health savings account. The health savings account is a special type of account you can open up at your local bank. It is very similar to an IRA with which you may be familiar. The contribution to your HSA or health savings account is not taxed. It is exempt from Federal Income Tax, State Income Tax, and FICA. Consequently, every dollar you contribute to your savings account goes almost twice as far as money that is taxed.

Spend Your Tax Free Savings Money
You can use your savings money to pay your dentist, your acupuncturist, your chiropractor, your eye doctor, your doctor, your prescription drugs and over-the-counter cough medicines. You can spend your health savings account money on just about any medically related expense.

Here is an example
How does the HSA type plan work? Let's take an example. Perhaps you wake up one morning and you have a fever and a pain in your right side. You go to the doctor. The doctor checks your symptoms and he decides to send you to the hospital. He suspects that you have appendicitis. You have your appendix removed.

Your Out-Of-Pocket Costs
What are your out-of-pocket costs? (We will assume that this happens in 2010.) When you visit the doctor, although the doctor would probably like to charge you more, he has contracted with your insurance company to accept a certain payment amount. Usually, this is $65 to $70 for the visit. You write him a check which draws on your HSA account that you have opened at your local bank, and pay him.

You go to the hospital and the admit you. The operation costs $30,000. You are responsible for your deductible, which in this scenario is the maximum amount of $5,950. This may sound like a very high deductible to have to pay, but it is actually in line with what you would have had to pay if you had a traditional copay plan. Once you have paid your $5,950, the insurance company will cover 100% of any additional insurance claims you have for the entire year.

Take The Time To Learn
HSA type plans may sound confusing at first, but trust me, you need to investigate them. Saving up to 50% on your insurance is very attractive.

Are you unhappy with your health care plan? Do you think that universal health care is the answer? Don't jump too quickly into what has not been very successful in other countries. While you are waiting for a solution, consider the solutions put forth here. Also, you can purchase a high deductible health plan for about 50% less. HSA Article

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