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7 Things You Should Know About Health Cost Saving Accounts

By Lombard Fitz

Health savings accounts (HSAs) are wildly well-liked. Because their introduction in 2004, approximately 2.5 million Americans have enrolled in these so-called consumer-driven well being ideas. But, alas, HSA strategies are not for everyone.

Here are some pointers to assist you consider whether an HSA will benefit you and your family.

1. An HSA strategy can cut healthcare expenses by an typical of 40% for many individuals. Nevertheless, some folks will not recognize any net financial savings. Individuals most likely to understand significant savings are folks who pay all of their own wellness insurance premiums, such as the self-employed, who are relatively wholesome with few health-related expenses.

2. Wellness cost savings program restores freedom of choice. An HSA strategy puts individual shoppers back in control of their own well being care. This also means that every person must be more responsible for his or her own health care decisions. This strategy of self-reliance isn’t often common with or proper for everyone, specifically those that have turn out to be comfortable with HMO-type “co-pay” plans.

3. Well being cost savings accounts minimize revenue taxes. Each dollar contributed into your HSA accounts is deducted from your taxable revenue within the identical manner as contributions into a standard IRA account–regardless of whether you spend it or just save it. Interest and investment earnings in a HSA accumulate tax-deferred, just like a traditional IRA. Unlike an IRA, withdrawals are tax-FREE when used to pay qualifying medical bills. In several circumstances, new accounts holders are in a position to almost fully fund their HSA with money saved on premiums from a prior, increased priced plan. By stashing all or most of individuals financial savings into an HSA, the accounts holder realizes instant, extra savings within the form of decreased taxes.

4. You must have a correctly qualified high well being insurance policy in place first before you can open a health cost savings account. One of the biggest misconceptions about HSA ideas is that any insurance policy with a high deductible will qualify the policyholder to establish an HSA accounts. IRS regulations, however, are quite specific. Not just any policy with a so-called “high deductible” will suffice. It is important to be certain that you are insured under a properly qualified policy. Your best bet is to work with a qualified and duly licensed health insurance broker who is experienced in marketing properly qualified HSA ideas.

5. You must be insurable in order to qualify for the HSA-qualified health insurance policy. Because most people do not have a correctly qualified high deductible insurance policy, they will need to switch insurance strategies in order to turn out to be HSA-eligible. Unless coverage is being offered under small group reform laws (generally groups with 2-49 employees), the new high deductible policy will be individually underwritten by an insurance company. This signifies that some “pre-existing” conditions may not be fully covered. Alternatively, some companies may opt to cover certain “pre-existing” conditions in exchange for slightly increased premiums. Unfortunately, some wellness conditions simply render an individual uninsurable (examples: diabetes, chron’s disease, heart attack, etc.). Underwriting requirements vary by state, which is another reason to rely on an experienced wellness plan broker.

You ought to not switch to a HSA program when the management of existing medical expenditures is more important than saving up-front medical insurance premiums. Do not change health ideas: in the middle of ongoing healthcare treatments; after a major wellness issue has been diagnosed; or if any family member is pregnant.

Generally, it is comparatively hassle-free to qualify, i.e. no health-related exams, etc. Most insurance companies offering HSA coverage will issue based on your application answers, perhaps accompanied by a follow-up telephone interview. In some cases, health-related records may be requested, and companies often reserve the right to order a paramed exam.

6. Although HSA insurance premiums are low, they aren’t always as low as you might expect. This happens for one main reason. Simply stated, the underlying insurance policy is just that-a well being insurance policy. Although it has a “high” deductible, as required by law, the insurance company still need to compensate for the risk it is assuming over the deductible amount, which it does by charging premiums. Many companies offer policies with “one deductible” that all family members contribute toward. With individuals ideas, it just isn’t uncommon for premiums for a 5000 family deductible with 100% coverage after the deductible to be comparable to a 2500 “per person” deductible strategy with 80/20 coverage after the deductible.

Lower premiums represent just one element of the lower net cost achieved with an HSA plan. The low net cost of an HSA program is achieved after factoring inside the benefits of lower taxes, made possible by the tax-deductible contribution to the HSA account. Thus, if obtaining the lowest possible gross premium is your main concern, you may wish to think about a high deductible, non-HSA policy, specifically if you do not see the benefit to contributing to a tax-deductible savings accounts.

7. An HSA offers your best chance to keep a lid on health insurance rate increases. Make no mistake-you will have rate increases with your HSA insurance policy. Because an HSA qualified policy is still a wellness insurance policy at heart, there is no logical reason to presuppose that an HSA policy would be immune to rate increases required by an insurer to keep paying claims and stay in business. But what you can expect is that the actual dollar amount of any future rate increases will be substantially lower compared to traditional well being insurance ideas (regular PPO and HMO plans). This is true because insurers base increases on percentages, and the identical percentage of a lower base premium results in a lower dollar increase. It’s not a perfect solution-but it is the most cost-efficient solution for many qualified folks.

Take into consideration the guidelines above and some various insurance articles and you’ll surely be successful.

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Article Citation
MLA Style Citation:
Fitz, Lombard "7 Things You Should Know About Health Cost Saving Accounts." 7 Things You Should Know About Health Cost Saving Accounts. 7 Oct. 2010. 15 Sep 2014 <>.

APA Style Citation:
Fitz, L (2010, October 7). 7 Things You Should Know About Health Cost Saving Accounts. Retrieved September 15, 2014, from

Chicago Style Citation:
Fitz, Lombard "7 Things You Should Know About Health Cost Saving Accounts"

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