North Carolina Health Savings Account
What is a North Carolina Health Savings Account (HSA)?
- A North Carolina Health Savings Account (HSA) is similar to an IRA in that it is a tax deductible savings account that is linked with a High Deductible Health Plan (HDHP). Your deposits into your HSA are tax deductible, your savings grow tax deferred and can be withdrawn tax free to help pay your medical insurance deductible or other North Carolina qualified medical expenses like vision, prescriptions, and dental.
- HSA contributions and interest earned carryover from year to year allowing you to build up your savings over time. You will never lose your savings or pay taxes as long as your HSA funds are used to pay for qualified medical expenses. If you elect to cancel your HDHP then you can no longer make contributions to your HSA, but you can continue to spend your savings on qualified medical expenses.
- Many carriers offer a range of North Carolina health plans that qualifiy as a High Deductible Health Plan (HDHP) which is required to set up an HSA. For 2010, the minimum deductible allowed by The Treasury Department is $1,200 for individual coverage and $2,400 for family coverage. The maximum out of pocket allowed on a HDHP is $5,950 for individual coverage and $11,900 for family coverage.
- Similar to an IRA, there are maximum contributions that can be made to you HSA. For 2010, the maximum annual contribution for individual coverage is $3,050 and for families the maximum annual contribution is $6,150. However, if you are 55 or older, you can make an additional $1,000 "catch up" contribution annually.
Here are some brief videos that will help explain how a North Carolina HSA plan works and why you should consider this as an option
How does a North Carolina HSA plan compare to a traditional North Carolina Health Insurance copay plan?
Example: Male-43, Female-42, Son-10, Daughter-8. Charlotte, NC residence with no health conditions.
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Plan Details
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Family Copay Plan
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Family HSA Plan
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Deductible
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$2,500 (up to 3/family)
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$5,450 (1/family)
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Coinsurance
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80%
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100%
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Office Copay
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$15 Primary
$30 Specialists
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100% after deductible
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Prescriptions
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$10 Generic
$35 Brand
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100% after deductible
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Preventive Care
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$15 Copay
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100%
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Vision (Routine Eye Care)
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$15 Copay
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N/A
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Hospital Care
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Deductible and Coinsurance
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100% after deductible
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Lifetime Maximum Benefit
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Unlimited
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Unlimited
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Monthly Premium
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$945
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$575
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Total Annual Premium
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$11,340
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$6,900
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Tax Savings with $4K Deposit into HSA (25% Fed, 7.5% FICA, 5% State)
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N/A
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$1,500
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Average Net Monthly Premium
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$945
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$450
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Percent Savings with HSA and Tax Savings
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N/A
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52.4%
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Example Scenario...Let’s see how the plan works
Let's take a look at how the current plan stacks up against an HSA plan in this scenario.
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Family Copay Plan
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Family HSA Plan
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Treatment
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Actual Cost to Insurance
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Cost to Individual
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Actual Cost to Insurance
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Cost to Individual
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E.R. Visit
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$585
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$150 (copay)
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$585
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$585
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X-Rays
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$189
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$0
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$189
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$189
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Visit to Family Dr
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$120
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$15 (copay)
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$120
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$120
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Surgery
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$5,890
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$2,500 deductible + $678 Coinsurance
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$5,890
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$4,556
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Physical Therapy
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$70 x 18 visits
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$540 in copay
(18 visits x $30)
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$70 x 18 visits
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$0 - Deductible met
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Anti Inflammatory
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$120
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$35 (copay)
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$120
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$0 - Deductible met
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Total Cost of Service
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$8,164
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$3,918
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$8,164
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$5,540
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Factor in Annual Premium
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$11,340
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$6,900
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Factor in Tax Savings on HSA
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N/A
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($1,500)
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Total Annual Cost
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$15,258
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$10,940
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This illustration was meant to show what a single person's liability would be in a common type scenario. Because of the way most North Carolina health plans work, this family is paying the insurance company $11,340 annually for the opportunity to spend another $3,918 in deductible, coinsurance and copays on only one person. The family would still be liable for up to $7,000 in additional deductible and coinsurance expenses (plus any copays) if two or more of the other family members needed medical attention in the same calendar year. Total family Out of Pocket (OOP) exposure on this plan is $11,500 (not counting copays for office visits and Prescription drugs)
In the HSA, they would pay the insurance company $6,900 annually for the opportunity to spend $5,540 in total for all family members. Total family OOP on this plan is $5,540. The HSA is simply a more cost efficient means of financing annual healthcare expenses.
Your HSA savings can be used to pay for qualified expenses including services not covered by your HDHP.
- Dental treatment including braces and dentures.
- Vision care including eyewear, contact lenses and cleaning solutions. LASIK eye surgery.
- Chiropractic Care and Acupuncture.
- Long Term Care Premiums (certain limits apply) and Medicare premiums and deductibles.
- Some over the counter medicine, including antacids, pain relievers, cold medicine and others.
- For a complete list see Publication 502 from the IRS.
Many people are hesitant to get an HSA plan because of the lack of coverage until you meet your deductible. There are many different ways to solve that issue and fill in the gaps with supplemental plans like a North Carolina accident insurance policy or a North Carolina critical illness insurance policy. These plans are relative inexpensive and with the savings you are getting by choosing an HSA qualified plan you are still saving money over a traditional copay plan. By combining an HSA plan + Accident Plan + Critical Illness plan you are getting what we call your Total Protection Plan.
When you combine that with the lower overall out of pocket expense than traditional plans as well as the tax savings, having a qualified North Carolina health savings account plan makes a lot of sense for the informed buyer.
