Advantages of Insuring Adult Children through a Health Savings Account
Health Savings Accounts (HSAs) continue to generate buzz as America’s newest option in health care coverage, providing distinct advantages in health insurance for adult dependent children. As Health Care Reform requires health insurance plans that cover dependent children to also include health insurance for college students and adult children up to age 26 (for plan years effective after September 23,2010), HSAs offer parents a manageable way to control their health investments while insuring their adult dependent children.
“Consumer-driven health care, including HSAs, has the power to change a family’s financial future while also catalyzing positive change in America’s health care system as a whole,” shares Kelley Jensen with eIndidivualHealth.com.
During this season of open enrollment, Jensen shares several points to consider before signing up for a HSA for a family with adult dependent children. First, it’s important to determine the dependent status of adult children. If the child is still tax-dependent to his or her parent (up to age 19, or up to age 24 if a full-time student), then the child’s out-of-pocket medical expenses can be paid by the parent’s HSA account for Child Only Health Insurance. When the child is no longer a tax-dependent but is still included on the parent’s health insurance plan (up to age 26), then the child’s out-of-pocket medical expenses cannot be paid by the parent’s has for Child Only Health Insurance. The adult child would need to set up their own HSA to pay for their own medical expenses.
If a parent has a tax-dependent adult child (up to age 24), they can choose to set up the adult child’s HSA as part of their HSA plan during open enrollment. As the primary account holder, the parent would include enrollment records on file for these adult children. If an adult child (up to age 26) opens his or her own HSA, he or she can contribute up to the full family amount ($6,150 for 2011).
In addition to providing distinct advantages for family health insurance plans with coverage for Child Only Health Insurance, HSAs also cover a wide range of medical expenses not typically covered by low deductible health insurance or other healthcare accounts. This coverage includes acupuncture or chiropractor visits, contact lenses, language training, nursing services, and orthodontia.
The monthly premium for the HSA is also much less than a normal insurance plan, as the plans have a higher deductible. For an adult child that might not go to the doctor very often, that can be quite a savings.
HSAs also have other distinct advantages over other benefit plans:
- It’s a savings account that allows individuals to set aside tax-free money for health care
- It rolls over from year to year (there is no “use it or lose it”), giving individuals more
control over their healthcare dollars
- It’s an account that individuals own and remains in place regardless of where an
individual works
- Interest is paid, and the money can be invested in mutual funds since it is owned by the
individual
- Individuals pay less each month for high-deductible health insurance
- Individuals receive tax advantages on multiple levels: pre-tax contributions to their HSA,
tax-exempt interest and investment gains on their HSA, and tax-free withdrawals for qualified medical expenses
“The HSA is an easy tool that offers consumers a very manageable way to take control of their health investments,” adds Jensen. “It puts all of the financial incentives in the right place to encourage the consumer to make healthier lifestyle choices, better health care related financial decisions, and to invest and save money over time for future medical needs.”
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