Individual/Family Health Insurance Article

HSA Savings Account

A Health Savings Account Can Help You Save Money

If you want a way to save money on the cost of your health insurance, consider a Health Savings Account, or HSA for short, and a high deductible health plan, or HDHP for short. The health savings account is a flexible savings vehicle designed for those that want to take control over their medical spending. Note that if you decide to establish an HSA, you must also elect an HDHP for your health insurance coverage—the two function as a pair.  Congress created the HSA/HDHP combo in an effort to give consumers greater control over how they spend their health care dollars.  Simply put, you establish an HSA with a financial institution, typically a bank, deposit a certain amount of money in the account each year, and then spend that money via the bank’s debit card on health-related expenses.  See our HSA Contribution Limits page for information on how much you can put into your account each year.

The dollar amount in the HSA savings account coordinates with the insurance plan’s deductible, but also gives you a lot more benefit than simply paying expenses to meet that deductible. For instance, because the HDHP by definition has a high deductible, it will in turn have relatively lower monthly premiums than most traditional health insurance plans.  Also, you can use your HSA debit card to pay for health-related expenses that many traditional health care plans typically would not cover.  If you purchased an Anthem Lumenos HSA Virginia health plan this is your overview of benefits and costs. See below for examples.

HSA for Dental and Vision Expenses

Individual vision plans are often inadequate or have limited coverage and most often simply include discounts. Dental insurance is often expensive and offers a limited reimbursement toward larger bills. By using an HSA savings account and high deductible health plan, instead of purchasing vision or dental insurance, you can use the funds you accumulate in your tax-free savings account toward the cost of dental and vision care needs.

Using an HSA Plan

Once the money is in your account, you control how you spend it. If you want to pay for a medical expense that your insurance company doesn’t cover, such as certain “over-the-counter” medicines , you can use your HSA. The insurance company may not count these expenses towards satisfying your deductible, but it will reduce your overall cost as these purchases will be made with tax free dollars. Learn more about how you can use your health saving account at our HSA qualified expenses page.

Health Savings Account as a Savings Vehicle

If you don’t use the money in the HSA savings account, it remains yours to keep. And while there are limits on how much you can contribute to your health savings account each year, there are currently no limits as to how much you can allow to accumulate there—tax tree. That’s the best part! You no longer have to pay high premiums to insurance companies only to end up with no claims at the end of the year and money out the window. The unused HSA funds transfer to the following year and continues to grow interest and accumulate until you need it. It remains yours forever. Use for medical needs most companies refuse to cover if you wish or continue to accumulate funds.  At death, it passes to heirs. You don’t have to pay the money into your HSA savings account all at once or on a systematic basis. If you find that you have a lump sum you’d like to add in addition to the amount you already contribute monthly, you can do it as long as it doesn’t go over the maximum amount set by the federal government.

Health Savings Accounts for Employers

In addition to all the benefits described above for individuals,  HSA savings accounts and high deductible health plans can also be used by employers. If you, as an employer, can’t offer complete health coverage, you may contribute to employees HSA accounts but you must make certain that you offer the same amount to each employee if you do it on a pretax basis in order to comply with non-discrimination rules.  To learn more about how to use or set up a health savings account for a small business, visit our Small Business HSA page.

Comments and Questions

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Comment from Mark on July 08, 2011

This is great. I'm going to move forward with an HSA. Why give the insurance companies more money?

Comment from Jeby on July 07, 2011

I can see that you are putting a lot of time and effort into your blog but HSAs are only a good deal if you have money. We need a single payer system. Until then I'll stick with my HSA but I'd rather have universal health coverage.

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