Health savings accounts (HSAs) are extremely popular. Since their introduction in 2004, about 2.5 million Americans have signed up for these so-called consumer-driven health plans. But, alas, HSA plans aren't for everyone.
Here are some tips to help you determine if an HSA will benefit you and your family.
1. An HSA plan can reduce health care costs by an average of 40% for many people.
However, some people will not realize any net savings. The people most likely to realize significant savings are people who pay all their own health insurance premiums, such as the self-employed, who are relatively healthy with few medical expenses.
2. The <a href="http://www.hsahealthplans.com">health savings plan</a> restores freedom of choice.
An HSA plan allows individual consumers to take back control of their own health care. It also means that each individual needs to be more responsible for their own health care decisions. This approach to self-reliance isn't always popular or appropriate for everyone, especially those who have become familiar with HMO-style "co-pay" plans.
3. <a href="http://www.hsahealthplans.com ">health savings accounts</a> reduce income taxes.
Every dollar contributed to your HSA account is deducted from your taxable income in the same way as contributions to a traditional IRA account, whether you spend it or simply save it. Interest and investment income in an HSA accrue tax-deferred, just like a traditional IRA. Unlike an IRA, withdrawals are tax-free when used to pay eligible medical expenses. In many situations, new account holders are able to fund their HSA almost entirely with the money saved on premiums from a higher priced prior plan. By storing all or most of these savings in an HSA, the account holder realizes instant additional savings in the form of tax relief.
4. You must first have a highly qualified health insurance policy before
you can open a health savings account. One of the biggest misconceptions about HSA plans is that any insurance policy with a high deductible will allow the policy holder to open an HSA account. IRS regulations, however, are quite specific. Not just any policy with a so-called “high deductible” will do. It is important to be certain that you are insured under a suitably qualified policy. Your best bet is to work with a qualified, properly licensed health insurance broker who is experienced in marketing properly qualified HSA plans.
5. You must be insurable to qualify for the HSA qualified health insurance policy.
Since most people do not have a properly qualified high deductible insurance policy, they will need to switch insurance plans to become eligible for HSA. Unless coverage is offered under small group reform laws (typically groups of 2-49 employees), the new high deductible policy will be underwritten individually by an insurance company. This means that some "pre-existing" conditions may not be fully covered. Alternatively, some companies may choose to cover certain "pre-existing" conditions in exchange for slightly higher premiums. Unfortunately, some health conditions simply make a person uninsurable (examples: diabetes, chronic illness, heart attack, etc.). Underwriting requirements vary from state to state, which is another reason to rely on an experienced health insurance broker.
You should not switch to an HSA plan when managing existing medical expenses is more important than saving initial medical insurance premiums. Do not alter health plans: amid ongoing medical treatment; after a major medical condition has been diagnosed; or if a family member is pregnant.
Generally it is relatively easy to qualify, i.e. there are no medicals etc. In some cases, medical records may be requested and companies always reserve the right to order a paramed exam.
6. Although HSA insurance premiums are low, they are not always as low as one might expect.
This happens for one main reason. Simply put, the underlying insurance policy is nothing but a health insurance policy. Although she has......
