subject: Health Savings Accounts - Advantages and Disadvantages [print this page] Health Savings Accounts - Advantages and Disadvantages
Do you understand health savings accounts (HSA)? These plans actually consist of two important parts, and they can benefit many people. But HSA health plans are not for everybody!One is a higher deductible major medical insurance policy. The other one is the actual savings account.The idea here is that the health insurance policy will cover the big bills. If the account gets funded, it provides the money to cover many bills that would not be included in a major medical policy, or it can pay bills until the deductible is reached.There are some key advantages to having an H.S.A., but these will not benefit everybody. First look at some of the benefits. Then it will be easier to decide if you should be an H.S.A., PPO, or HMO!The contributions the savings account will not be taxed if they are within current IRS limits. This means that a family can put away pre-tax income to use for health expenses. This makes that money go further.Cash in the account will roll over if it doesn't get spent. Hopefully, this gives a family or individual the opportunity to set aside enough money to help them with medical expenses. Some accounts even earn interest just like regular savings accounts.In addition, the account may be used to pay for some health care costs that would not even be covered by major medical insurance. Some examples may be dental care, eyeglasses, or vitamins. Make sure you consult current tax rules and specific plans to see how the money can be spent.Because the actual H.S.A. major medical comes with a larger yearly deductible, so the rates should be lower. Some insurers relax underwriting rules a bit for higher deducible insurance so there is also a chance that more people would be accepted. For those who are accepted, but may have some minor health conditions, there may be a better chance they will only have to pay standard rates.By now, you may have figured out that some people can realize a big benefit from this type of plan. If you need an additional tax deduction, this is a great way to get it while saving for future health expenses. An H.S.A. also allows you to control your costs by paying less for major medical while saving for future expenses in a way that gives you tax advantages.A health savings account can combine with a higher deductible major medical plan to benefit a disciplined saver who can benefit from tax deductions. The cash account will keep growing, so it can continue to grow from year to year. At retirement age, the money can be withdrawn with no penalty.As mentioned before, these plans do not work out that well for everybody. The actual cash account can only help if there is actually cash there. If a plan member never makes deposits, there will not be any cash in the account when bills need to get paid, and there will not be any tax deductions!
