Health savings accounts

What they are

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A health savings account is a tax-advantaged medical savingsaccount available to taxpayers in the United States who areenrolled in an HSA-qualified high-deductible health plan.

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HSAs can grow tax-deferred in your account forlater use. There's no deadline for making a withdrawal: Consumerscan reimburse themselves in future years for medical costs incurrednow.

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HSA contribution limits:

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Individuals (self-only coverage) – $3,350 (up$50 from 2014)

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Family coverage - $6,650 (up $100 from2014)

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The annual limitation on deductions for an individual withfamily coverage under a high-deductible health plan will be $6,650for 2015.

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The maximum out-of-pocket employee expense will increase nextyear to $6,450 for single coverage from $6,350, and to $12,900,from $12,700, for family coverage.

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See: IRS announces 2015 HSA limits

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What's new

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The out-of-pocket limits include deductibles, coinsurance andcopays, but not premiums. But starting in 2015, prescription-drugcosts must count toward the out-of-pocket maximum.

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Account numbers — and exploding growth

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Health savings accounts have grown to an estimated $22.8 billionin assets and roughly 11.8 million accounts as of the end of June,according to the latest figures from Devenir. The investmentconsulting firm said that's a year-over-year increase of 26 percentfor HSA assets and 29 percent for accounts.

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Projections

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Devenir projected that the HSA market will exceed $24 billion inHSA assets covering more than 13 million accounts by the end of2014. Longer-term predictions are far greater: The Institute forHealthCare Consumerism, for one, estimates that 50 million Americans will be covered byHSA-qualified health plans by Jan. 1, 2019, and thatHSA adoption will grow to 37 million.

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Who's using them

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Both men than women. The gender distribution of people coveredby an HSA/HDHP as of January 2014 was evenly split — 50 percentmale and 50 percent female. But males have more money in theiraccounts. At the end of 2013, men had an average of $2,326 in theiraccount, while women had $1,526, according to the Employee BenefitResearch Institute. EBRI reported that older individuals haveconsiderably more money in their accounts than do younger HSAusers: Those under 25 had an average of $697, while those ages55-64 had an average of $3,780, and those 65 or older had anaverage account balance of $4,460.

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Other things of note

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People are becoming more active and better managers of their HSAdollars. In 2012, 52 percent of HSA account holders spent in excessof 80 percent of their dollars on health care expenses, accordingto research by the HSA Council of the American Bankers' Associationand America's Health Insurance Plans.

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Flexible spending accounts

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What they are

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FSAs allow employees to contribute pre-tax dollars to pay forout-of-pocket health care expenses — including deductibles,copayments and other qualified medical, dental or vision expensesnot covered by the individual's health insurance plan.

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They're also known as flexible spending arrangements, andthey're more commonly offered with traditional medical plans.

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Limits

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On Oct. 30, the IRS announced the FSA contribution limit for2015 would increase $50 to $2,550 under the Patient Protection andAffordable Care Act.

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What's new

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Last fall the U.S. Treasury Department issued new rules thatlet employers offer employees the $500 carryover. Previously,unused employee FSA contributions were forfeited to the employer atthe end of the plan year or grace period, which industry insiderssay were a barrier to adoption. The rule went into effect in2014.

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Double-digit growth

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Alegeus Technologies said that clients whohave actively promoted the FSA rollover allowance to their employergroups and eligible employees are seeing 11 percent incrementalgrowth in FSA enrollment and 9 percent growth in FSA elections —compared to a flat overall FSA market growth.

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Projections

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The change to the FSA use-it-or-lose-it rule wasgreeted enthusiastically by employers, consumers and industryinsiders. Many believe adoption will grow with that amendment.

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Who's using them

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An estimated 35 million Americans use FSAs.

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Other things of note

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A survey from Alegeus Technologies says most consumers, and evenaccount holders specifically, do not fully understand account-based healthplans, including HSAs, FSAs and health reimbursementaccounts. Only 50 percent of FSA holders passed a FSA proficiencyquiz.

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