S is for Some Understanding of Health Savings Accounts (HSA)
Health care costs have risen drastically over the years. It will take a lot of ingenuity and planning to help get this industry under control. One of the primary goals of Consumer-Driven Health Plans such as a Health Savings Account (HSA) is to deal with the continual rising cost of health insurance. It helps to make patients more aware of the actual costs of medical services, thus creating a wiser more objective consumer.
A HSA Plan has two products working together: a savings account and health insurance plan. The benefit of this plan is a tax-advantage savings account that is designed to work with an HSA-compatible health insurance plan.
The insurance portion for your HSA plan – is a HSA – Compatible High Deductible Health Policy. These plans offer premium savings and considerable discount for physician services and prescription drugs in exchange for higher deductibles.
The savings account is set up to pay your deductible and other medical expenses, but unlike traditional Health plans it has a self-funding option. Many financial institutions offer a variety of investment options for HSA’s such as stocks, bonds, mutual funds, etc. If you use money from the HSA for non-medical expenses, you’ll have to pay taxes on it (plus a 20% penalty before age 65). Additionally, the HSA is subject to contribution limits.
The way these two products work together is that your HSA funds go toward paying most of your covered medical expenses until you fulfill your yearly deductible. Your insurance policy then provides benefits and coverage based on your policy’s terms.
How can you tell if an “HSA” is right for you? Make sure you understand as much of the information as possible before deciding on a health insurance policy. Know your personal needs. And compare the pros and cons based on your health needs and financial capabilities.