HSA Health Insurance
As health care costs continue to rise, and with them health insurance premiums, more people are seeking alternative ways to help cover their health care expenses. One such way is a Health Savings Account HSA), a fairly new plan that allows you to set aside money for health care tax-free.
How Health Savings Account Work
Health Savings Accounts are different from other benefit products, such as Flexible Spending Accounts and PPOs, in that an HSA rolls over from year to year there is no "use it or lose it"). Furthermore, interest is paid on the account, money paid into it can also be invested in mutual funds, and it is owned by you, not your employer. For these reasons an HSA has often been likened to a "medical IRA."
In order to take advantage of an HSA, you must be covered by a High Deductible Health Plan HDHP). Sometimes referred to as a "catastrophic" health insurance plan, an HDHP is an inexpensive health care plan that generally doesn't pay for the first several thousand dollars of health care expenses--which is your deductible--but will often cover you after that. An HDHP generally costs less than traditional health care coverage i.e. $300/mo. in premiums vs. $200/mo. for an HSA), so the money that you save on insurance can be put into the Health Savings Account. The money in the HSA is there to pay for the expenses the HDHP doesn't cover.
You can sign up for an HSA through banks, credit unions, insurance companies and other approved companies. Employers may also set up a plan for employees as well. Currently, you can contribute up to $2,850 annually for individual coverage or $5,650 for families people age 55 and older can make an extra catch-up contribution of $800).
Who's Eligible for a Health Savings Account?
Since 2007, in order to qualify to open an HSA, your HDHP minimum deductible must be at least $1,100 for self-only coverage or $2,200 for family coverage. Annual out-of-pocket costs, including deductibles and co-pays cannot exceed $5,500 for self-only coverage or $11,000 for family coverage.
Health Savings Accounts are available to anyone under age 65. However, those enrolled in Medicare or receiving VA benefits cannot establish and contribute to an HSA. If you had an HSA before you enrolled in Medicare or began receiving VA benefits, you can keep it but cannot continue to make contributions into the account.
Furthermore, in order to open an HSA you cannot be covered by another health insurance policy that isn't a qualified high-deductible plan either as an individual or a dependent), although you can still have other disability, dental, vision and long-term care insurance policies outside of Medicare and VA benefits).
The Benefits of an HSA.
According to Tom Shriver, VP National Sales) at NetQuote, one of the primary benefits of an HSA is related to the tax advantage it provides.
"One of the biggest benefits is having the ability to pay your out of pocket medical expenses with pre-tax dollars," Shriver says. "For every pre-tax dollar I spend in an HSA, I actually get $1.38. That's a 38% gain in my instance."
Due to the high deductibles of HDHPs and the fact that an HSA is essentially a savings account, Shriver says that Health Savings Accounts benefit healthy individuals more than those requiring extensive medical care. The less you have to tap into it, the better opportunity for you to accrue a significant amount of money in the account.
"An HSA is a better investment if you're healthy," Shriver says. "The ones who benefit from it the most are the people who don't use it much. It's more to help pay for catastrophic health care events than for continuous health care. So before deciding to open an HSA, it's important to evaluate your medical situation and how frequently you go to the doctor."
However, if you determine that an HSA is the right way to go for you and your family, it can be a better investment than regular health insurance. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis. Furthermore, you own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.
Like with any other health plan, it pays to do your homework. You can learn more about HSAs by visiting www.HSAInsider.com and www.HSADecisions.org. You can also compare several companies insurance policies in most states through NetQuote.
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