What is a Health Savings Account?
A health savings account, or HSA, is a special savings plan that is used specifically for the purpose of paying for healthcare related expenses. They work in a similar manner as a personal savings account in that you are the sole owner. Therefore, it is you who makes all decisions regarding how you spend the funds within it. There are some requirements regarding who can participate in an HSA. Continue reading if you’d like to learn about these types of accounts and how they can benefit you.
About Health Savings Accounts
There is no tax requirement on your HSA money. However, in order to be eligible to open this type of savings, you do need to be enrolled in a health insurance program with a high deductible. The purpose of this combination of high-deductible health insurance and HSA is the work as a cost-saving safeguard. The rationale behind this by insurance companies was that people would spend their own money more frugally than they would if they believed all expenses were covered by the insurer.
Points to Consider
A health savings account may not be a sound idea for everyone, though it does have advantages for many. If you are someone who is in good overall health and rarely seek medical treatment, this could be a good option for you because you are not likely to need to meet the costs of a high deductible. Also, those close to retiring often like the idea of using an HSA to offset healthcare related costs once they’ve left the workforce. If you rely on your health insurance to cover regular or anticipated high-cost treatments, you may prefer a different type of plan due to the deductible costs associated with an HSA.
Many holders of health savings accounts enjoy the freedom that allows them to decide where much of their money is going. You are able to choose how much to contribute to your account and exactly how to spend it. Even if you receive an employer contribution and leave your position, you are able to hold onto the money. The funds aren’t taxed, and unused portions roll over each year. It can be difficult for some people to save money for an HSA, and it can be hard to decide just how much to set aside in order to cover necessary expenses. Finally, if you decide to make a withdraw from your HSA, that money will be taxed.
Setting Up an Account
You don’t have to go through your employer to set up your HSA, but you can if one is offered and that is your preference. You may also choose to enrolled in a plan through a bank, credit union or other financial institution that offers one. The criteria you must meet are to be younger than 65 years of age with a high-deductible insurance policy. That’s it.If your spouse is not fully enrolled in your insurance coverage, but uses it as a secondary provider, it’s imperative that he or she also be enrolled in a primary insurance program with a high-deductible policy. In addition, you may not be enrolled in another healthcare plan in order to qualify for an HSA.
Now that you know what is involved in a health savings account, you can make an informed decision regarding whether one is right for your needs.
