Health Savings Account: Insurance Planning Services

Health Savings Accounts (HSAs) are savings accounts created especially for the purpose of paying medical expenses. When used in conjunction with a qualified medical insurance plan, HSAs can be used to cover what insurance does not – including deductibles and non-covered, medically necessary services.

Simply put, you replace your HMO with an insurance plan with a specific deductible (ensuring coverage for big-ticket health costs such as hospitalization as well as other medical expenses). The money that would have been put towards more traditional health coverage premiums is then placed into an HSA and withdrawn for qualified medical expenses such as office visits, trips to the dentist and eye glasses until the deductible is met. Then, your insurance plan takes over coverage.

The benefit to you? Contributions into HSAs and medical expense withdrawals are income-tax-free. Additionally, the interest earned on contributions to your HSA is tax-favored so you save throughout the year on your health insurance premium, earn tax-deferred interest on your contributions and you save again when you file your taxes.

You can make withdrawals from your account by simply writing a check for your qualified medical services. Spending your HSA dollars on non-medical expenses will result in tax penalties. While not a penalty-free option, it offers peace of mind should an emergency arise.

If not used, your money simply sits in the account earning interest (at a much higher rate than most typical savings accounts). The money can be removed at age 65 without the penalty tax for normal living expenses and taxed as regular income, just like a traditional IRA.

As with most insurance plans there’s a lot to understand. But don’t let the complexity scare you. That’s what we’re here for. Call us and we’ll explain it in plain English.

HSAs represent the future of health care. They put you—not your HMO—in charge of spending your health care dollars.