Why a Health Savings Account (HSA)

As insurance costs continue to rise, Health Savings Accounts may be an answer to your problems.

But first, do you need Health Insurance? Absolutely! A hospital stay can easily add up to several hundred thousand dollars and medical costs are the leading cause of bankruptcy. Also, if the injury or illness is serious enough, you could be out of work for some time and no money coming in to pay for your bills. Health insurance is just good financial planning.

So how does a HSA work? With this type insurance you have two parts: A. your insurance policy; B. your savings plan.

Your insurance. HSA's require a major medical, high deductible health plan (HDHP). Your premiums are always lower with a higher deductible. Why is that a requirement? Small claims resulting in more paperwork are costly and those costs are passed on to you in the manner of higher premium. With high deductibles, you are taking care of your smaller costs. For a single person deductible starts around $1,200.00 and for family coverage it starts around $2,400.00. Of course those figures can be increased resulting in more savings (lower premiums).

The Health Savings Plan: By lower premiums with the HDHP, you can invest or save the money in a tax deffered savings plan. There are limits on the money placed in your account. Any money placed in your account is "before tax dollars", or tax deductible and it grows tax deductible. The amount you may place in this account is different per individual and for a family with a maximum in 2007 of $2,850 for an individual and $5,650 for a family, regardless of when you open your account. Your dollars placed in your account can be withdrawn (tax free) for qualified medical expenses. The IRS does list the qualified expenses eligible for your withdrawals. Just a few of these would be: chiropractor, accupuncture, dental, contact lens, eyeglasses, etc. A full list is provided in Section 213 (d) of the Internal Revenue Code. Any funds left over at the end of the year roll over to the next year. This is not a "use it or lose it" situation.

You will have great health insurance plan coupled with the means to pay for medical expenses not covered by "traditional" plans.

Please continue to moniter this blog as I will continue to cover the aspects of the HSAs.