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Information about all aspects of finances affected by a serious health condition. Includes income sources such as work, investments, and private and government disability programs, and expenses such as medical bills, and how to deal with financial problems.
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Health Reimbursement Arrangements 101 (HRAs)

People For Whom An HRA Works - Including People With A Serious Health Condition

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  • In general, Health Savings Accounts (HSA) work for employees whether or not an employer offers an HSA, as well as for self employed people.
  • Contrary to popular belief, HSAs work well for people with a serious health condition or history of a serious health condition.

In General, People For Whom An HSA Works:

HSAs work for the following people who are under age 65:

  • Employees - whether the employer contributes to the HSA or the employee pays 100% of his or her health insurance premium.
  • People who are self-employed (who can also deduct 100% of health insurance premiums).
  • People with relatively high income who have the money to fund the plan and who can use the tax shelter.
  • People with a history of a serious health condition.
  • People with sufficient income to fund an HSA who need a low-deductible policy even though there is a more expensive premium. The wealthier you are and the longer you pay into the account without using it, the more you can benefit. An HSA can even supplement retirement money.

HSAs And People With A Serious Health Condition

Conventional wisdom has been that HSAs don’t work for people with a medical condition. An HSA may not become the same tax shelter it is for other people, but HSAs do work for people with a medical history because:

  1. If you have a managed care type policy, you have control over a good number of health care decisions such as which specialist to see and when. You also have a choice of which drugs to purchase rather than be concerned whether or not a drug is on a formulary.

  2. No matter what type of health plan you have, a high deductible generally provides savings on premium likely equal to the amount you put into the HSA. If you don’t spend all the money in a year, you come out ahead.

  3. From a tax point of view, medical expenses are not deductible until you spend at least an amount equal to the threshold. (The threshold for the itemized deduction for unreimbursed medical expenses is 10% of the taxpayer’s Adjusted Gross Income (AGI). However, in the years 2013–2016, if either the taxpayer or the taxpayer’s spouse has turned 65 before the close of the tax year, the threshold is 7.5% of AGI. In 2017 the 10% threshold will apply to all taxpayers.) Even then, the only expenses that are deductible are those which exceed the threshold. By using pretax dollars to fund an HSA, you effectively get the same benefit as if you deducted the expenses. Plus you have the benefit of a lower premium. (To learn more, see: Medical Expenses).

  4. If an employer contributes to the plan, you basically increase your income by the amount of those tax free dollars.

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