All that you need to know about health saving accounts

Health Savings Account (HSA) is an account that was designed by the federal government in order to make healthcare affordable for people and also in order to save taxes.  There are many such accounts that help in saving the taxpayers’ dollars.  While with the other options such as flexible spending accounts (FSA) or the medical savings accounts, there are chances of forfeiting the savings if it lies unutilized till the end of the year, HSA’s are much more reliable accounts, wherein the money meant for healthcare will remain in the accounts even if it remains unused.

Most often HSA’s are used in combination with High-deductible plans.  Although, this plan might be offered by employers, it is generally available to self-employed individuals or to someone who needs an individual insurance plan.  Most often, people choose a high-deductible insurance plan and pay a low premium.  The difference amount is put away in HSA in order to cover the areas that the insurance does not cover.  Since the money is paid from pre-tax dollars, it is tax-exempted.

Advantages of HSA:

• It is a savings account for (potential) healthcare expenses.
• Helps save hundreds of dollars in taxes.
• Money is safe and cannot be forfeited for its non-use.
• Money is portable (from one employer to another).
• Can be transferred from one location to another.
• Not taxed as long as the amount is used for medical expenses only.

In all, as long as the medical bills are not reimbursed by insurance, the money from the HSA could be utilized for any medical expense that may include expensive tests, scans, doctor’s fees, medical bills at the drug store, or any other qualified forms of alternative medicine which come under the purview of medical treatment.

While HSA may be advantageous to many, individuals who already have high medical costs may not find it as advantageous.  However, the tax-saving element still holds good for such individuals also.  It just requires some tips and advices from the tax advisor.

List of expenses that HSA covers:

• Doctor’s visits.
• Prescription drugs.
• Dentists.
• Opticians.
• Chiropractors.
• Orthodontists.
• Laser surgery (eye).
• Over-the-counter meds.
• Over-the-counter birth control pills etc.

There are many more in the list which could be obtained while opening the account.

Health Savings accounts work very well for those who do not have high medical costs.  In such cases, the money is put away in savings so that it could be used in the future for any potential healthcare issues.  This way the money that is used in insurance is cut down thus ensuring that the money is not forfeited in case of non-use.  The tax benefit is also available on this amount if used for healthcare.  Even in case the HSA amount is not utilized before a person’s lifetime, the money would not be forfeited as it would go to the beneficiary who would be named while opening the HSA.  Health Savings Accounts play a major role and a consumer driven healthcare would be part of the healthcare reforms in the future as well.  This would enable the consumer to make informed choices for the future.