Health Savings Accounts, also known as HSA plans are gaining popularity across the nation. HSAs provide you with the ability to control your health insurance premiums and save money tax free.
An HSA plan actually has two parts. First you must have a qualified High Deductible Health Plan (HDHP). Once the HDHP is purchased, you can then set up a savings account to work in conjunction with the health plan.
Some people are weary of having a high deductible plan, but more times than not it works to the insured's advantage. Sure, the small claims won't be paid by the insurance company, but the money saved in health insurance premium will likely be larger than the amount spent on the small claims out of pocket. The typical person will usually visit the doctor once or twice per year, if each doctor visit costs $150, that's only $300. In many cases an HSA type health plan can save you up to 35% in premium.
The Health Savings Account is set up to help you save for those smaller claims and even healthcare expenses not normally covered by a health insurance plan. Any money put into HSA will not be taxed. This money will never be taxed if the funds are spent on qualified medical expenses. Most healthcare expenses are eligible, including dental and vision costs. You will generally earn interest on any money in the HSA, which is also tax differed. If the funds in the account are spent on anything other than qualified expenses, you will be responsible for paying income tax and a 10% IRS penalty.
All funds in the Health Savings Account are yours. You control when and where to disperse the funds. You will not lose the funds if they are not spent by the end of the year.
The funds in the savings account will automatically roll over year to year.
Once you reach age 65, the funds can continue to be withdrawn on a tax-free basis to pay qualified medical expenses including long term care insurance premiums. Withdrawals made for any other purpose are subject to income tax and a 10% penalty. The 10% penalty is waived for distributions made by individuals age 65 and older.
Contribution amounts are limited. Please read in our frequently asked questions section for more details.
More and more insurance companies are now offering HSA qualified plans. We suggest you shop around to find a plan which fits your needs best. Blue Cross Blue Shield, Humana, United HealthCare, Assurant and Golden Rule are among some of the top companies whom now offer HSA qualified health plans.
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