Three Benefits of a Health Savings Account
Don’t know which insurance plan to choose? Opting for a high-deductible health plan and opening a health savings account could save you money.
High deductible health plan
Thinking of switching to a high deductible health plan? Typically, enrolling on a high deductible health plan allows you to open a Health Savings Account (HSA). An HSA is helpful because it’s a tax-exempt account set aside for healthcare expenses—it can help you meet your deductible and pay or reimburse other medical expenses you may incur.
Here are some reasons having an HSA maybe be beneficial for you.
Helps to manage expenses
Combined with a qualified high deductible health insurance plan, an HSA can be a good way to manage your healthcare expenses.* By contributing money into an HSA, you’ll be surprised at how quickly your savings can add up.
The money in your HSA could be used for medical expenses or can be left to grow over time. You are in control of your money, and all contributions remain in your account until you use them.
You can use an HSA to meet your insurance deductible and pay other qualified medical expenses that aren’t covered by your plan. Some employers match what you contribute—an even better reason to have one.
You could save on taxes
Money is deposited into an HSA without being taxed and any investment earnings you may accrue in the account aren’t taxed, either. Any earnings that you might gain in an HSA aren’t included in your income while held in the HSA.
Amounts spent on qualified healthcare expenses are tax free—though you do have to report both contributions and expenses when you do your taxes each year. If you do withdrawal from the account for non-qualified expenses, it is taxed according to your current tax bracket and may be subject to an additional tax.
The money is always yours
Unlike a Flexible Spending Account (FSA), an HSA is not a “use it or lose it” situation. There are limits to how much you can contribute each year, but the good news is, the money in an HSA rolls over year to year. It’s your money forever, even if you change employers or leave the work force.
You can start using funds in an HSA as soon as a deposit has been made and funds are available. An HSA will come in handy when paying for copays or when you need to pay for qualified medical expenses, which could include items such as bandages, contact lenses, or crutches.
Need more information to help you understand insurance? Read our other healthcare-related articles.
*You must be enrolled on a qualified high deductible plan to qualify for an HSA. However, not all high deductible health plans are eligible to be paired with an HSA.
This is not a substitute for professional tax or legal advice. When making financial decisions, always check with your personal financial advisers before making decisions that have the potential to impact your tax liability.
SelectHealth may link to other websites for your convenience. SelectHealth does not expressly or implicitly recommend or endorse the views, opinions, specific services, or products referenced at other websites linked to the SelectHealth site, unless explicitly stated.
“5 Reasons to Love Your Health Savings Account.” Intermountain Healthcare. n.d. Web. 17 Mar. 2017.
“Frequently Asked Questions.” HSA Center: All about Health Savings Accounts. UnitedHealthOne Agency. n.d. Web. 17 Mar. 2017.
“Health Savings Accounts and Other Tax-Favored Health Plans.” Internal Revenue Service, Department of Treasury. 2016. Web. 31 Mar. 2017.