A Health Savings Account helps you save and pay for health care and medical expenses. It is a kind of account that allows you to deposit and save money on a pre-tax basis so you maximize the money you can use for your own health. Opening a Health Savings Account is not possible without enrolling in a high deductible health plan. Let’s dive in!
What is a Health Savings Account?
To lower your overall health care costs, you can use your health savings account to pay for pre-determined health-related expenses like deductibles, coinsurance, copayments, and most other expenses. To make it as simple as possible, you deposit money in your health savings account to reserve that money for health-related expenses only.
The money you deposit in an HSA is completely untaxed and interest-free and counts as pre-taxed earnings to maximize the effectiveness, minimize your health care costs, and lower your tax bill.
To make sure your health savings account is of actual use to you, you need to make sure you regularly contribute and deposit funds into your HSA account. You can only take advantage of the tax-free money if you can save up enough in your account to cover whatever medical and health care expenses you might have. If you struggle to save money or don’t have any savings, a health savings account might not give you any benefits at all.
How Health Savings Account Work
Only you and your employer can make contributions and deposits to your health savings account. These contributions have an annual limit, but you can use it to pay for pre-determined medical expenses like dental, vision, and pharmacy drugs that your high deductible health plan might not cover.
Health Savings Accounts were created to make people more careful and aware of how and where they spend their health care money. This is because with an HSA account, as you are the one who is paying for the health care expenses instead of your employer or your insurance company. Thus, you are more likely to pay closer attention to what work you need and how costly it is. When we pay out of our own pockets, we tend to look for the best deal and the right places for our health care.
Rules and Regulations
There are a few rules and regulations behind Health Savings Accounts. Firstly, you can only withdraw and use amounts from your HSA for qualified and pre-determined medical expenses. The entire list is long and detailed. It includes things like dental and vision that most health insurance companies don’t usually cover. Also, the money you deposit is yours, and yours only.
The deposits you make don’t have to be used within the tax year and can roll over to later years. Also, when and if you change your place of employment, you can keep and transfer your previous HSA account to use at your new job.
Is a Health Saving Account Right for You?
If you are a usually healthy person and want to save for health care costs after retirement, a health savings account might just be perfect for you. While if you are generally unhealthy, a person with high medical risks, or just someone who doesn’t save up well, an HSA might not be what you are looking for.
As we said before, if you don’t regularly contribute and save, an HSA account is almost useless since when and if you do need to withdraw for medical expenses, you might not even have enough saved up to pay for the costs you incur.