Top Five Facts About ‘Health Savings Accounts’
The uptake rate on Health Savings Accounts (HSAs) has been steadily on the rise in recent times. To ensure you know all the necessary information on these accounts, here are the top five things to keep in mind when considering an HSA.
1 – Employers Favor the HSA Option
It is important that you take independent advice on whether a HSA is right for you or not. That is, do not just take the opinion of your employer in to account. HSAs are a great option for employers, because it places the onus of your wellbeing back on you. They could equally be as useful for you (the employee) because of the 10 – 40 percent health insurance premium discount which applies to those with HSAs linked an employer’s provided health insurance plan. However, the downside is that the deductible on these health insurance plans is often sky high – requiring more financial input from you for every health claim you make. This is the trade-off that you need to take into consideration.
2 – Not As ‘Cheap’ As They Appear
If you’re young and healthy, an HSA could be an ideal way to save money on health insurance coverage. As we already mentioned, policy premiums are 10 to 40 percent cheaper with HSAs linked in. However, the major factor here which could actually make the plan far more expensive than a traditional health care policy is the deductible. On plans with a HSA in place, the minimum deductible for individuals is $1,200 and for families, $2,400. The draw card for many when it comes to HSAs is the tax-free nature of the savings account. All withdrawals from the ‘fund’ are completely tax-free.
3 – Consider Your Age
HSAs are perfect for the younger audience. However, for we older folk, there is more to a HSA than meets the eye. The limits of the accounts have the potential to render such coverage inefficient. For example: Those who under 55 can save $3,050 (individuals) or $6,150 (families) tax-free. For those over 55, $1,000 more can be added to each of those figures – taking the benefits up to $4,050 and $7,150 respectively.
4 – Every HSA Case Is Different
The tricky thing when it comes to HSAs is that every individual case will be different, i.e. there’s no generic recommendation. Hence, before signing up to such a program, you should definitely check with an independent adviser as to whether or not this health care insurance structure is right for you.
5 – Consider it a Retirement Fund
Another interesting thing to think about is using the HSA as part of your retirement fund. If you’ve already got enough cash in the bank to cover medical expenses outside of your health care insurance plan, consider this to be an interest bearing, tax-free savings account which you can use at any time once you’re over 65!
photo credit: Philippe Put
Tags: employer-based coverage, hdhp, health savings accounts, hsa
January 5th, 2011 at 7:04 pm
I have had an HSA plan for several years now, and with our premiums skyrocketing, I decided to go out for new quotes.
Much to my amazement, the HSA-compatible plans are quoting MUCH HIGHER premiums than virtually identical non-HSA plans.
Do you have any thoughts on this? Is this a recent development, or just the insurance companies’ way to get more blood out of the stone?