HSA (Health Savings Account)
A Health Saving Account plan is a great option for individuals who are interested in saving money today to pay for future medical expenses. There are several requirements in order to be accepted for enrollment in an HSA: applicants need to be approved within a High deductible health plan (5HDHP) and applicants must be under the age of 65.
An employer can offer HSA plans to their employees. Both the employer and employee can contribute to fund the health saving account. Keep in mind that there may be a limit to that contribution.
How does HSA plans work?
An HSA is basically a savings account, created through an insurance company with pre-tax dollars set aside for medical costs. The value of an HSA can increase over time as the funds do earn interest. Money in the HSA can also be invested, which may also make the value of the account grow.
The first step towards opening an HSA plan is applying for a high deductible health plan (5HDHP). The main reason for this is because a plan with a very high deductible, typically 1000.00 or more, tends to be less expensive than standard health insurance. The money saved can be placed in the health savings account. The money in the HSA can be used to pay for medical expenses until the deductible is met. All money that is not used will remain in the account; earning tax-free interest.
Eligibility for HSA Plans
There are several requirements to be eligible for this type of plan, for example:
You need to be under the age of 65 to be eligible for HSA plans.
As mentioned earlier, applicants are also required to enroll in a HDHP in order to deposit into the HSA account. These plans are available through several insurance companies. Keep in mind that premiums will vary depending on the state where you live.
You cannot open an HSA if you are listed as a dependant on anyone else’s Tax Return.
You may at your discretion purchase supplemental health insurance plans to your HDHP, such as dental, vision, disability, long term, specific injury and or accident health insurance, and you may be entitled to use HSA funds to pay for them.
Benefits offered by HSA plans
The peace of mind brought by the financial ability to be able to afford health insurance is priceless; these HSA plans provide you with a security you can count on to pay for healthcare in the future.
There are many tax advantages with HSA plans. For instance, the funds placed into any Health Savings Account are free from income taxes. Depending on where you are located, the money might be also exempt from state taxes.
Health savings accounts are portable; this means that if you are laid off of a job all of your savings can be moved. The funds in the savings account will automatically roll over year to year.
An HSA account can be used to cover medical costs that are not typically paid for by health insurance companies, for example:
Alternative medicine such as acupuncture, aromatherapy, nutritional consulting, etc.
- Chiropractic services
- Dental expenses
- Maternity expenses not covered by your health plan
- Medical equipment such as wheel chairs, guide dogs, etc.
- Mental health therapy, which might include charges of psychotherapists and psychiatrists.
- Most or all of the health expenses of your spouse or dependant children
- Non prescription drugs, such as aspirins
- Preventive health programs, which can include immunizations, tests, laboratories, etc.
- Health expenses related to transportation or lodging
HSA Plans Disadvantages
Although there are many advantages to these plans, the main disadvantage of an HSA plan is they are designed be coupled with a high deductible insurance plan, and to provide major medical or catastrophic coverage and not pay for typical everyday health expenses.