What’s A Health Savings Account?
Health Savings Accounts, or HSAs, are a new arrival on the health insurance market. They’ve
gotten a lot of attention and generated a lot of controversy — yet most people still
don’t know what they are or how they work.
Health Savings Accounts are not a new kind of health insurance plan. They are bank
accounts that work with certain health insurance plans to help people save and pay
for their health needs. The bank accounts come with tax incentives to encourage people — and
their employers — to make deposits that go toward paying for healthcare.
What Kind Of Health Insurance Does An HSA Work With?
To be eligible for an HSA, you have to enroll in a high deductible health plan — also
called an HDHP. Almost all the major insurance companies offer high deductible health plans.
To be considered an HDHP, the plan has to have a deductible of more than $1,050 (or $2,100
if the plan is for family coverage).
High deductible plans work just like traditional health insurance. Besides having high deductibles,
they have premiums, co-payments, and co-insurance. HDHPs can be traditional plans — sometimes
called indemnity plans — or PPO plans.
Because you have a high deductible, the monthly premium is low. But the real advantage isn’t
in the plan itself — it’s in how you pay for it.
The Advantages Of Using An HSA
Health Savings Accounts are designed to make your out-of-pocket healthcare expenses more affordable.
HSAs let you:
- Save money in an interest-drawing bank account
- Invest that money, just like you’d invest funds in a 401(k)
- Deduct your contributions from your income taxes
- Make tax-free withdrawals to pay for healthcare costs
- Withdraw money without penalty for non-medical expenses after age
65
HSAs are still new, and opinion on them is split. But they are quickly gaining popularity.
Before deciding if an HSA plan is right for you, you
should learn more. Once you understand the background and details
of HSAs, you’ll have a better sense of whether you should enroll.
While almost everyone is eligible to have an HSA, not every health plan is HSA-compatible.
Even some high deductible plans may not meet the IRS requirements for compatibility.
To find an HSA-compatible plan, talk to an insurance agent. You can use our service to get
free quotes from agents licensed in your area. We’ll match you with agents,
and they’ll help you find a plan that works for you.
