How Do HSA Health Insurance Plans Work?

How Do HSAs Work?

One form of major medical insurance that has become increasingly popular are called HSA (Health Savings Accounts) health insurance. These HSA plans actually combine 2 different things to help insured people manage their health and health insurance costs. You need to understand how HSA health insurance works, so you can decide if one would be the best health insurance for you!

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• Health Savings Accounts (HSA) – These are actual savings accounts. They may earn interest too! Contributions to an HSA may be deducted according to IRS limits. These tax deductible contributions can shave a tax bill. In addition, the money can be used for a variety of medical services. Some examples are health insurance deductibles and medical services like dental and vision care that are not covered by the major medical policies that they work with. Some HSA plans come with a card, like a debit card, making them very easy to use!
• Higher Deductible Major Medical Policies – These are major medical health insurance plans that cover an insured person once the yearly deductible has been met. The higher deductible means more out of pocket costs, but it should also mean cheaper health insurance! In theory, the savings account can cover some, or all, of the higher deductible if the insured person has made regular deposits.

Advantages of an HSA

There are some big advantages to having an HSA health insurance plan instead of a traditional PPO or HMO. The higher deductible health plan should cost less than a lower deductible plan, and it may have easier underwriting rules too! In addition, the account can actually earn interest besides being tax deductible. Any money that has not been used will keep rolling over from year to year, and this money can be withdrawn when an insured person reaches retirement age (goes on Medicare). And since HSA contributions are tax deductible (up to IRS limits), members can benefit from big tax savings. For people who can set up a disciplined savings plan, and who like to have control over their health costs, HSAs work very well!

Disadvantages of HSAs

HSA plans do not work well for some people. That higher deductible health plan means that an insured person could pay more for health care every year. The plan only works if the person actually makes regular deposits into the savings account portion! Some covered people, who did not make regular contributions, had a hard time coming up with the deductible amount.

Should You Buy HSA Health Insurance?

If you can stick to a savings plan, and if an extra tax deduction would benefit you, you should consider an HSA health plan. In addition, knowing that any unused money will roll over until retirement makes this a logical way to help with your long term planning. However, if you do not think a system like this will benefit you, you may want to look at the advantages of PPO health insurance.

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