What Are Health Savings Accounts?
Health Savings Accounts

Health Savings Accounts (HSA) allows patients to pay for qualified medical bills with pre-tax dollars, while also saving money for retirement on a tax-deferred program. Congress passed a law promoting Health Savings Accounts as recently as 2004. HSA is a tax-friendly savings account that is used with HSA-eligible health insurance plans to make health care affordable and advantageous as respects to retirement.

How HSA Works

Health Savings Accounts are similar to an IRA with these primary differences: (1) with an HSA pre-tax money is deposited every year into an HSA account and can be withdrawn at any time to pay your portion of medical bills with no additional penalty (provided they are qualified bills). (2) Withdraws can be made for unqualified expenses or even non-medical reasons, but will be subject to tax and a 10% penalty if done before retirement age. (3) Any has funds that are not used before the year ends will stay in the savings account and earn interest without tax or penalty. (4) A health savings accounts belongs to the consumer; however, your employer can also contribute to the account.

How To Get An HSA

Before you can ever get health savings accounts, you have to make sure your health insurance plan is HSA-eligible. These types of plans are sometimes called high deductible health plans, and cost generally less than other plans which have low deductibles. The plan must have an annual deductible of $1000.00 or more for individuals and $2000.00 for entire families. Also, the total of the yearly deductible and the other out of pocket expenses for the whole year must not be more than $5000.00 for individuals or $10,000.00 for families.

HSA plans are becoming very popular among consumers. Just because the insurance company is paying for most of the medical expenses, doesn't mean that deductibles are easy to come up with. Health savings accounts not only protect you from large medical bills, these accounts can also help you plan retirement. Ask about HSA accounts and make sure it's available on the plan of your choice.