When you choose new health insurance, you may notice that some plans give you the option to enroll in a Health Savings Account. If you haven’t had this benefit before, you may be unsure of the advantages it provides.
Here is some more information to help you determine if you should choose an account with an HSA option.
What Are Health Savings Accounts?
Let’s face it; health insurance is expensive. Whether you are purchasing it directly from a supplier, considering options from healthplans.com, or through your employer, a large amount of your income goes to this monthly expense.
However, you probably understand the importance of this policy and want to ensure you and your family are never without it. To help offset the cost of insurance, companies created Health Savings Accounts.
HSA accounts are independent of your health insurance policy and are available with high deductible insurance plans.
The funds are taken from your paycheck pre-tax, and some employers offer contributions.
The money set aside is available to pay for qualifying medical expenses that you would typically be paying for with your post-tax income.
Essentially, you pay your medical fee with tax-free money, which leaves more in your bank account.
What Qualifies as a Medical Expense?
When you choose to have an HSA, you must be familiar with what your specific policy covers.
Nearly all plans allow you to use money from a health savings account to pay for:
- copays, deductibles and co-insurance
- prescription medication
- COBRA and Medicare premiums
- medical devices
- dental copays
- eyeglasses and contacts
- feminine hygiene products
- acne treatments, creams or washes
- bug spray and sunscreen
- over-the-counter medication
Many companies provide you with a debit card directly connected to your HSA account to make purchasing these products easy.
However, a few still require you to submit your receipts for reimbursement.
Are There Time Limits To Using the Funds?
Another advantage of having an HSA, besides the fact that the money isn’t taxed, is that these accounts roll over each year.
You are not required to use all the money in the account during the year that you set it aside, as with some Flexible Spending Accounts.
The money is yours to use any time you need it, even if it is years or decades in the future, which makes a perfect way to set funds aside for a medical emergency.
The fact that you can keep these accounts for as long as you wish makes them an excellent way to save for retirement.
There is no tax collected on the funds when you withdraw them, so you don’t have to worry about additional fees when using this account.
If you let money accumulate over several years, you can use it even after you are no longer working without having to pay anything other than the amount of purchase.
HSAs make it much easier to afford your medical bills during retirement.
Choosing to enroll in a Health Savings Account when you purchase high-deductible insurance is an excellent benefit to include.
These accounts give you the ability to pay for medical expenses with tax-free money. Since there is no deadline to use the funds, you can save money in this account, which you can use during retirement or an emergency.