What Is A Health Savings Account For Health Insurance Coverage?

By Robert Fredricks Posted in Health Insurance News

Health Savings Account

Health savings accounts were created and signed into law on the Medicare bill, by President Bush in 2003. The purpose of the bill was to help people save for future medical expenses and retirement health care through a tax free account. Health Savings Accounts are not the same as flex spending accounts. Health savings accounts are supported by the federal government and flex spending accounts are employer-based accounts. They have different governing restrictions and exist for different purposes.

How The Health Savings Accounts Work

The Health Savings Account, or HSA, works by allowing people with a high-deductible plan, who do not have any other type of first-dollar coverage, to put money away each month tax free to help cover future medical expenses. Unlike a flex spending account, you do not lose the money at the end of the calender year. The money you put in can be taken out and applied to medical bills, tax free. You can remove the money for other things but will have to pay taxes plus a fee.

Contributions to the HSA can be made three ways; through single or family contributions, an employer can make contributions to an employee’s HSA, and as your employer sponsors it, cafeteria plan contributions can be made through this program. If you are making contributions to your own plan you do not need to itemize it as a deduction on your taxes since it is contributed tax free.

Who Is Eligible?

Any adult, 55 and over, who is eligible for Medicare or Medicaid, can participate in this plan. Others may participate in this plan but would be limited in the amount of contributions that can be made yearly. Whereas those over 55 can make catch-up contributions to their plan. Funds deposited to the HSA are the sole property of the owner of the account and are also portable. The funds can be transferred to another retirement account without penalty.

Related posts:

  1. What Is A Health Care Savings Account?
  2. What Is A Health Reimbursement Arrangement For Health Insurance?
  3. What Does A Flexible Spending Arrangement Mean For Health Insurance?
  4. Do Health Savings Accounts Really Save Money?
  5. Little Known Tips On How To Manage Your Health Savings Account

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