Health insurance is an important part of every family’s budget, right along with energy costs, groceries and taxes. Health Savings Accounts (HSA) are the newest form of health insurance to be offered to individuals and businesses alike. HSA plans were passed through Congress in 2003 with the intent of benefiting employers and employees alike. Is a Health Savings Account in your future?
Who Needs an HSA?
The need for HSAs arose from the increased use of High Deductible Health Plans (HDHP). Many individuals and families, in an attempt to save money on monthly premiums, opt for an HDHP. The premiums for HDHPs are generally lower than other individual health insurance plans. However, if you end up in an accident or incur major medical costs, the deductible can put you in a financial bind. It’s a risk that many people take to save money monthly; however, HSAs make the choice less risky.
How Do HSAs Work?
An HSA is a tax privileged savings plan that is offered to all taxpayers in the United States. To qualify for one, you must be enrolled in a HDHP. The purpose of the HSA is to save funds in a sheltered environment to offset the costs of the high deductible.
The HSA account will bear interest just like a regular savings account, but has specific tax advantages. The contributions to the account can include pre-tax dollars, which can save you from the income tax due on the funds. You can also have others, like your family or employer; contribute to the H SA on your behalf to help you meet the maximum allowed contribution.
This maximum contribution must equal lesser that 100% of your health plan deductible, or $2560 for individuals and $5,250 for family plans. Before using your HSA account, be sure to confirm the maximum allowed contribution with your health care provider.
HSA Benefits
The HSA funds can be used for office visits, hospital expenses, lab work, and some prescriptions. There may also be restrictions on what can be funded from the HSA account, so make sure to check with your health insurance provider. The money from your HSA will also roll over from year to year, so you can create a large account to draw funds from. Additionally, since your HSA is normally obtained independently from your health insurance plan, you can use the account even if you switch insurance companies. It makes the money in the account portable and usable for a number of years.
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