Health Savings Accounts and High Deductible Savings Accounts Put You in Control of Health Costs

Health Savings Accounts (HSA’s) are tax-exempt accounts where funds grow to pay for medical expenses. They usually earn interest on the funds that are deposited. Funds roll over every year, so an individual does not have to use up their money by the end of the year. The maximum amount that can be contributed on a tax exempt basis is determined by the IRS. This year, an individual could contribute up to $2,850, and a family could deposit $5,650.

Health savings accounts were created to help give control back to consumers and lower health care costs. HSAs provide a financial incentive for consumers to select a High Deductible health plan that is compatible with an HSA. High Deductible health plans will have lower premiums that other types of health insurance, and the combination of a tax-exempt health savings account and a higher deductible health plan should encourage consumers to do some shopping for their health services.

The IRS determines the minimum deductible amount for a high deductible health plan. Right now, the minimum individual deductible is $1,100, which is not really all that high. The minimum deductible for a family is twice that, or $2,200. However, actual out of pocket expenses may be higher than the specified deductible. An insurance policy may require some coinsurance, even after the deductible is met, and not all medical services may be covered. Again, HSAs can help provide funds for extra medical expenses!

Important Facts About HSA’s

  • You can use your money tax-free at any time for eligible medical expenses. You can even use your money to pay for expenses like acupuncture and dental care that may not be covered by your major medical insurance policy!
  • When you turn 65, you can use the money for non-eligible medical expenses. The money is subject to income tax, and there are no IRS penalties. In other words, you can consider your account health savings, plus retirement savings!
  • If you are under age 65 and use your money for non-eligible medical expenses, you will be subject to income tax and a 10% tax penalty.

Learn More About High Deductible Health Plans and HSAs

In order to determine if a high deductible health insurance plan, combined with a health savings account, will benefit your family, you need to compare various plans on the market. It is simple to search on line for various options. I would always look for an on line quoting system that participates in a third party quality assurance system like the BBB On Line Reliability Program.