The best HSA deals seem to be at credit unions. Below are a few good ones from credit unions in which anyone can join. In addition to rates, I've included links to my reviews of the credit unions.
Rates current as of 3/15/09:
- Patelco Credit Union HSA - 5.12% APY, $1/mo fee (waived for 1st yr) credit union review
- Alliant Credit Union HSA - 4.00% APY min $100, no fees, credit union review
- Connexus Credit Union HSA - as high as 4.00% APY min $100, no fees, credit union review
This overview was provided by a guest writer.
Health Savings Accounts (HSA) were created in Medicare legislation and President Bush signed them into law on December 8, 2003. They're special savings accounts owned by individuals that are used to pay for medical expenses now and in the future, and are used along side a High Deductible Health Plan that doesn't cover first dollar medical expenses. First dollar medical benefits that would result in someone being ineligible for an HSA include Medicare, Tricare Coverage, Flexible Spending Arrangements, and Health Reimbursement Arrangements. The high deductible insurance can be HMO, PPO or indemnity, as long as it meets the requirements.
In order to use HSAs, you must have a high deductible health plan and not be covered by any other health insurance or enrolled in Medicare. A high deductible health plan must have a minimum deductible of $1,150 (self only coverage) or $2,300 (family coverage) as of 2009. The amounts increase annually to account for inflation. Children cannot establish their own health savings accounts but money from a parent's account can pay for their qualified medical expenses, and if you can be claimed as a dependent on someone else's tax return you are not eligible for an has. Spouses can each have their own HSAs if both are eligible. There are no income limits or requirements for having earned income in order to contribute to a health savings account.
For 2009, contributions to an HSA are limited to $3,000 (self only coverage) and $5,950 (family coverage) per year. Contributions can be made by the individual owning the health savings account, by the individual's employer, or by both. If the individual makes contributions into their own account, it is considered an above the line deduction. Other people can make contributions on behalf of an HSA individual, and the owner of the health savings account takes the deduction.
Distributions from a health savings account are tax-free if they are used for qualified medical expenses, which now include the cost of over-the-counter medication. Qualified medical expenses can cover the individual owner of the account, their spouse and any dependents of the individual - even if the spouse and children are not covered by the high deductible health plan.
Don't confuse the Health Savings Account with a Flexible Spending Account, as they are two different types of savings options with a number of differences. One of the primary differences is money saved in an HSA is not forfeited if not used within a year, where as money saved in an FSA that isn't used at the end of the year is forfeited (the company holding the FSA gets to keep it!) If you are using a Flexible Spending Account, you need to have a very good idea how much money you'll spend during the year on qualified medical (and childcare) expenses so you don't waste money. The money you save in an HSA acts like an IRA in that it can be invested and you won't lose it if you don't use it all.
Health Savings Accounts are a great savings option for individuals with High Deductible Health Plans to manage their medical expenses without risk of losing their contributions.