Health Savings Accounts (HSAs) are savings accounts
created especially for the purpose of paying medical expenses. When
used in conjunction with a qualified medical insurance plan, HSAs
can be used to cover what insurance does not – including deductibles
and non-covered, medically necessary services.
Simply put, you replace your HMO with an insurance plan
with a specific deductible (ensuring coverage for big-ticket health
costs such as hospitalization as well as other medical expenses).
The money that would have been put towards more traditional health
coverage premiums is then placed into an HSA and withdrawn for qualified
medical expenses such as office visits, trips to the dentist and
eye glasses until the deductible is met. Then, your insurance plan
takes over coverage.
The benefit to you? Contributions into HSAs and medical
expense withdrawals are income-tax-free. Additionally, the interest
earned on contributions to your HSA is tax-favored so you save throughout
the year on your health insurance premium, earn tax-deferred interest
on your contributions and you save again when you file your taxes.
You can make withdrawals from your account by simply
writing a check for your qualified medical services. Spending your
HSA dollars on non-medical expenses will result in tax penalties.
While not a penalty-free option, it offers peace of mind should
an emergency arise.
If not used, your money simply sits in the account earning
interest (at a much higher rate than most typical savings accounts).
The money can be removed at age 65 without the penalty tax for normal
living expenses and taxed as regular income, just like a traditional
As with most insurance plans there’s a lot to understand.
But don’t let the complexity scare you. That’s what
we’re here for. Call us and we’ll explain it in plain
HSAs represent the future of health care. They put you—not
your HMO—in charge of spending your health care dollars.