Health Savings Accounts: Overview of Rules for 2012 (CRS Report for Congress)
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| Release Date |
Revised Dec. 20, 2011 |
| Report Number |
RL33257 |
| Report Type |
Report |
| Authors |
Janemarie Mulvey, Specialist in Aging and Income Security |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Health Savings Accounts (HSAs) are one way people can pay for unreimbursed medical expenses (deductibles, copayments, and services not covered by insurance) on a tax-advantaged basis. HSAs can be established and funded by eligible individuals when they have a qualifying high-deductible health plan and no other health plan, with some exceptions. For 2012, the deductible for self-only coverage must be at least $1,200 (with an annual out-of-pocket limit not exceeding $6,050); the deductible for family coverage must be at least $2,400 (with an annual out-of-pocket limit not exceeding $12,100).
The annual HSA contribution limit in 2012 for individuals with self-only coverage is $3,100; for family coverage, it is $6,250. Individuals who are at least 55 years of age but not yet enrolled in Medicare may contribute an additional $1,000.
The tax advantages of HSAs can be significant for some people: contributions are deductible (or excluded from income that is taxable if made by employers), withdrawals are not taxed if used for medical expenses, and account earnings are tax-exempt. Unused balances may accumulate without limit.
HSAs and the accompanying high-deductible health plans are one form of what some call "consumer-driven health plans." One objective of these plans is to encourage individuals and families to set money aside for their health care expenses. Another is to give them a financial incentive for spending health care dollars prudently. Still another goal is to give them the means to pay for health care services of their own choosing, without constraint by insurers or employers. Since HSAs are still relatively new (they have been authorized for less than six years), the extent to which they will further these objectives is not yet known with any assurance, notwithstanding some early data.
This report is limited to a summary of the principal rules governing HSAs, covering such matters as eligibility, qualifying health insurance, contributions, and withdrawals. The major changes to HSAs in 2011 were a result of provisions in the Patient Protection and Affordable Care Act (PPACA). These include changes to the definition of qualified expenses and increases to the penalty for distributions for non-qualified expenses. These are discussed in greater detail in this report.
This report will be updated as the rules change, either by legislation or regulatory action.
