An HSA, or health savings account plan, is a Federally legislated tax-advantaged medical savings account created in 2003. An HAS allows you to save from pre-taxed money or tax-savings from post-taxed money—if the money is spent on medical expenses. HSAs are usually part of a high-deductible PPO plan.
The HSA plan provides a different way for patients to afford their medical care and is an alternative to traditional health insurance. The savings account permits a patient to build the resources to pay for current care and to save for future care.
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Advantages of a Health Savings Account Plan:
- A high-deductible PPO has a small monthly premium, allowing the insured to save money that would have been spent on premiums. That money is put into the HSA (or health savings account).
- The money in the HSA is tax-free.
- The money in the HSA belongs to the individual, even if an employer deposits the money into the account. Even if he changes jobs, the HSA follows the employee.
- Using the PPO’s network provider list significantly lowers expenses and covers the insured in the event of a serious illness or accident.
- The unspent savings accumulated in the HSA is rolled over to the next year, allowing it to build.
- The money in the account may eventually be used for other purposes if taxes and a penalty are paid.
Disadvantages of a Health Savings Account Plan:
- Out-of-pocket costs can be expensive because of the high deductible. Coverage from the plan only begins after you have paid for fees up to the deductible amount.
- If you have a large amount of medical expenses in the first year or two, you may not be able to save enough to cover those pre-deductible expenses.
- It will still be necessary to pay co-insurance after the deductible is met.
- The bank may charge a fee to service your account.
Health Savings Account Plan (HSA) Details
The concept behind an HSA is to allow the insured to reduce medical fees by paying lower premiums and having a high deductible. You must be able to pay that deductible and co-insurance out of your own funds. Young, healthy people who don’t often need to see a doctor would be able to take advantage of this plan. They would be more able to accumulate a substantial amount in the savings account for times of high need. It might not be the best choice for families with young children or people who need to see the doctor often.
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