Health savings account – a blessing to the underpaid and uninsured

 Health insurance premiums in this country are perennially on an upward rise. This makes it practically impossible for the underemployed people to get quality health care when they most need it. A person is said to be underemployed when he or she is not being paid as much as their qualifications justify. The United States congress introduced the HSA or health savings account with an intention to make it possible for all classes of society to afford quality health care in the absence of a national health care scheme.

An HSA is a health coverage plan that combines a high deductible health plan with a type of savings account that is tax free for any medical related expense. Even many small employers are finding that it is much better to take up such plans rather than going for traditional health insurance plans.

The principle on which a HSA works is very simple. The person who takes the HSA has to also enroll in an insurance plan with very low premiums and high deductible. A deductible is that percentage of the medical bill that you are willing to pay out of your pocket. The higher the deductible, the lower your premium will be. Now again, the premium can be quarterly, monthly or annual which is pretty common. So when you open the health savings account, you can put money in it and retain ownership of the money. When you withdraw that money to pay for the deductible amount, you will not be taxed for the same. Even the dividends and interest are tax deferred. If you do not withdraw the entire amount beyond your retirement, you will find that you have a healthy nest egg up on which you can retire and spend your later years in peace.

Health savings accounts are all the more important in today’s economy given the fact that health insurance rates are not affordable by all. People are losing jobs all the time and employers are unwilling to pay the high premiums involved. Even if you are self employed, it makes sense to go for this option as you will not have a fixed recurring expenditure every year. Instead, you will be saving money in the health savings account like a regular account and you can withdraw that money to use for health expenses when necessary.

It has been estimated by the wall street journal that big companies spend more than $6000 on an average every year on health care costs for each employee. Also, more than half of America’s smaller companies fail to pay any sort of health incentive to their employees in order to cut costs. And this failing economy, it is hard for an employee to make demands when getting a job itself is a big task in the first place.