What is a Health Savings Account?
A Health Savings Account (HSA) is a way to set aside funds for medical expenses through a tax-advantaged savings account. It is only for individuals with a high deductible insurance plan. It is like a regular savings account, but only available for use on costs related to health care.
In 2003, HSAs were developed to promote consumer-driven health care. Ideally, this will help consumers form better health care spending habits since they are spending their own money. This also drives doctors and other providers of medical care to make their rates more competitive to get more business.
Considering an HSA
Health Savings Accounts can be very beneficial for the right individuals. The following are the most important deciding factors of whether to get an HSA:
- Projected spending on health care
- Your current financial state
- Amount of control you would like over your medical care expenses
You may be interested in an HSA if you are in good health and wish to set aside money for later on in life. However, it may not be the right choice if you require regular doctor’s visits and other health care services, and are unable to pay a high deductible. You must also be under the age of 65 to qualify.
High-Deductible Health Plans
Health insurance plans with a high deductible are for individuals who can afford to pay a higher annual fee for medical care. When the deductible is high, the premiums tend to be lower than a regular health insurance plan. If you want to pay more per year and less on a regular basis, you can be eligible for a Health Savings Account.
Setting Up An HSA
Health Savings Accounts are available for individuals through banks and financial institutions, after you have selected a high-deductible health insurance plan from a medical insurance company. If you have a spouse on your plan, they are required to have a high-deductible plan as well.
More About HSAs
- U.S. Department of the Treasury HSA Resource Center provides detailed IRS publications on Health Savings Accounts, statistics, and other information. They can be reached at 800-829-1040