Do Health Savings Accounts Really Save Money?

By Cathy Wilson Posted in Health Insurance News

A lot of people wonder if they actually can save money using a health saving account. Understanding what this account is and how they work will help you realize if they can really help you reduce health costs.

Health Saving Accounts

HSA are special savings accounts that are set up to pay for medical expenses. These accounts are not taxed and must be accompanied by a high deductible health plan. Employees can easily set up HSA, but individuals and those who are self employed can also participate. Money that is put into a health saving account is not viewed as income and thus can be deducted during taxation. The money is used to pay for any medical cost that is not covered by insurance. Unused amounts continue to accumulate and can be withdrawn after the age of 65. To qualify for HSA in 2010; an individual needs a plan that has a minimum of $1200 deductible, while a family must get a plan with $2400 minimum deductible.

How An HSA Can Save You Money

A health plan with a high deductible will cost less and will require cheaper premiums. However, the plan may not cover all your medical contingencies. By putting money into your HSA account, you will be able to pay for any medical expenses that your insurance does not cover. A number of healthy people use up just a little part of their HSA each year. This leaves them with an excess that continues to pile up and attract interest. This amount will be able to pay for any medical emergencies in the future leaving you adequately covered while you still enjoy paying relatively low premiums on your health insurance. The main advantage of having a HSA account is that it saves up the money you do not use up for medical bills. Unlike insurance where you cannot access unused accumulated premiums, excess money in an HSA can be withdrawn for any reason after you retire (you will have to pay tax when withdrawing your funds).

Due to the nature of Health saving accounts, they are better for people who are healthier with little medical needs. People with conditions that may require frequent or expensive medical care may use up all the funds in their HSA. You need to speak with an insurance agent to be sure that HSA is right for you.

Related posts:

  1. What Are Archer Medical Savings Accounts For A Health Insurance Policy?
  2. What Is A Health Savings Account For Health Insurance Coverage?
  3. What Is A Health Reimbursement Arrangement For Health Insurance?
  4. What Is A Health Care Savings Account?
  5. Little Known Tips On How To Manage Your Health Savings Account

One Response to “Do Health Savings Accounts Really Save Money?”

  1. We have had a Health Savings Account for the last two years. The first year is a little scary when you don’t have funds built up, but after that it’s great. We spend about $300 less per month on insurance than we used to and now we have more services ( dental, eye care etc ) than we had with our old PPO plan.

    I would strongly suggest a High Deductible Health Plan & HSA for young families who are financially strapped due to high health insurance costs. It’s been a huge money saver for us!

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