How to Decide if a Health Savings Account (HSA) is Right for Your Health Insurance
- 1). A health insurance savings account, HSA, is basically a special savings account you open in a bank. It is somewhat like a retirement IRA in that it allows you to invest your before-tax dollars into a medical account from which you can deduct whatever you need for medical bills.
- 2). There are a number of major advantages to having an Health Savings Account plan. One is that your monthly premiums will be much lower than other insurance plan payments. Another advantage is that you will not be charged taxes when you withdraw for qualified medical expenses. A third is that your account remains yours no matter who you work for or what insurance company you use. You can also invest your money in different savings or investment forms such as mutual funds to get the most value out of your investment. After age 65, funds can be withdrawn for more than medical use and only will be taxed as ordinary income at that point.
- 3). One of the biggest advantages is that money from HSAs can be used for medical expenses that might be excluded from many other health insurance plans. These are some areas your HSA will cover:
All drugs, prescription or over-the-counter
Dental work like implants, braces, bridges and crowns
Any of your insurance plan payments like deductibles and copays
Vision care -- even lasik surgery
Most psychiatric and psychological care
and even long term care
You will be given either a debit card or a check book to pay for your medical expenses. - 4). For the most part, however, funds from your HSA cannot be applied toward your regular health care insurance premium payments.
- 5). Individuals are allowed annually to put aside up to $2,900 for 2008 and $3000 for 2009 and for families as much as $5,800 (2008) or $5950 (2009). (2008 contributions must be made by April 15, 2009) Again, this money is not taxed, just like money put away in a retirement IRA.
Some HSAs do have minimum monthly requirements but others do not, depending on your plan. Either way, you are not required to put the full amount away each year.
People betweem the ages of 55 and 65 are allowed to invest an additional $900 for the 2008 year as a "catch-up" contribution. - 6). To create your HSA plan your will open your account which will as simple as opening a checking account or an Individual Retirement Account. Then you can choose from many different health insurance companies to find the provider plan you want. Both your HSA and your choice of health provider will remain in your own control.
- 7). To learn more details on how to decide if a Health Savings Account plan is the right insurance for you, please check the links provided in the Additional Resources below.
