As you ponder health insurance for 2024…
One option is a health savings account. HSAs are tax-advantaged arrangements used to manage deductibles and out-of-pocket costs and let you save for future health care expenses. Many employers have an HSA option. If your employer doesn’t offer it, check with your brokerage company or bank on whether you meet all the requirements to fund and keep an HSA for yourself or your family.
Some basics:
Eligibility for HSAs is restricted. You must have a high-deductible health plan to qualify. The minimum allowable deductible for 2023 is $3,000 for family coverage and $1,500 for self-only coverage. And out-of-pocket costs, including copayments, can’t exceed $15,000 a year for family coverage and $7,500 for individual coverage. For 2024, these amounts are $3,200, $1,600, $16,100 and $8,050, respectively.
Expenses for preventive care can be covered dollar-for-dollar by HDHPs, even if the deductible hasn’t been met. Alternatively, preventive medical costs can be covered by a lower deductible, depending on the terms of the policy. Some services and drugs for a range of chronic illnesses can be covered by HDHPs. Also, beginning in 2020, IRS allowed the costs of testing for and treating COVID-19 to be covered dollar-for-dollar by HDHPs, even if the deductible hasn’t been met, or a lower deductible may apply. This COVID easing applies through the end of 2024.
People eligible for Medicare can’t contribute to HSAs. If you have a balance in an existing HSA, once you turn 65, you can use that money on a tax-free basis to pay monthly Medicare Part B and D premiums. And you can take tax-free payouts from your HSA for your out-of-pocket medical costs, even if you are on Medicare.
HSAs have several major federal tax advantages that owners can enjoy.
Contributions are deductible or are from pretax wages. But there’s a limit. For 2023, the annual cap on deductible or pretax HSA contributions is $3,850 for self-only coverage and $7,750 for family coverage. For 2024, these amounts rise to $4,150 and $8,300. People who are 55 or older can put in an additional $1,000.
Earnings inside an HSA build up tax-free for the account owner. HSAs don’t have a use-it-or-lose-it rule, unlike flexible spending accounts. And any withdrawals that are used to pay medical expenses aren’t taxed. You needn’t take out the HSA funds in the same year you incur the medical cost. If you keep receipts, your HSA can reimburse you in a later year. Tax-free HSA funds can also be used to buy over-the-counter medicine and menstrual care products.
We’re following two House bills covering HSAs:
One would let people with subscription-based primary care become eligible to fund an HSA. Additionally, it would allow HSA eligibility for an individual whose spouse is enrolled in an FSA. This proposal was OK’d by the House Ways & Means Com. on a bipartisan basis. A second bill, with only Republican support, would provide a number of easings, the biggest being an increase in the amount of deductible HSA contributions.