Health Savings Account (HSA)

Health Savings Account (HSA) Insurance

The practical definition of an HSA, or Health Savings Account, is that it pairs a high-deductible insurance plan with a tax-free savings account that the insured can use for health expenses or save for a later date or retirement. Introduced in January 2004, these plans are a departure from traditional managed care plans and have some very distinct differences.

Many people today are asking the question “Is the new HSA healthcare revolution for me?”

Here is a sample of potential HSA plan advantages:

• Consumers can make pre-tax contributions to cover healthcare costs.
• Contributions can be invested, and earnings will be tax deferred, much like an IRA.
• HSA money can be rolled over from year-to-year, potentially building up thousands of dollars over time.
• Withdrawals for medical expenses are tax-free. Withdrawals in retirement are penalty-free.
• HSA’s come with “catch up” provisions allowing people older than 55 to contribute even more.
• HSA’s are no longer limited to small businesses. Anyone can potentially be eligible.
• The accounts are portable and can be transferred from job-to-job.
• Family plans have only one annual deductible to satisfy.

Health Savings Account (HSA) Insurance Trends

Proponents believe HSA’s can revolutionize healthcare, and even play a role in bringing down medical inflation. They predict large employer-sponsored plans will offer these benefits to their employees, supplementing a growing number of self-employed and small-business owners who have already switched to them. If done right, they can help you build up a large sum of tax-advantaged money that may help you survive a looming crisis in the retiree medical system.

As our longevity increases, and because medical coverage is getting harder to find, workers and retirees will face a rising need for money to pay for their healthcare. If medical inflation continues at its current rapid pace, prospects for future retirees may even get worse. As Medicare comes under severe financial pressure to reduce costs, and with fewer large employers offering retiree benefits, HSA plans have become a new avenue for consumers to create a nest egg to cover their future healthcare needs.

Health Savings Account (HSA) Insurance Plan Options

Typical plan options:

• High Deductible Plans – Not just any health insurance policy will qualify as an HSA. Each year, individual and family plan deductibles are set at a minimum and maximum amount. The policy cannot offer “first dollar” coverage benefits. In other words, a high-deductible policy cannot offer co-payments for doctor visits. Instead, those costs count towards your annual deductible which is an out-of-pocket expense to you.

Although a Health Savings Account (HSA) may not be the ideal choice for everyone, the majority of consumers will benefit from these plans. If you value the annual premium savings they offer and have the discipline to systemically invest in a savings account, then an HSA plan may be right for you.