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Many people are frustrated by constantly rising insurance premiums. It doesn’t seem to matter whether or not you are in good health, or what sort of plan you choose. Health insurance premiums will rise for anything ranging from “administrative” costs to a preventative care visit to the fact that you just turned 30. As a result, it is little surprise that some are beginning to consider a health savings account as a way to help defray costs related to health care.
How a Health Savings Account (HSA) works
The HSA comes with specific tax advantages that can help you reduce your tax liability. You open one by heading to your credit union, bank or some other approved company. After verifying that you meet the eligibility requirements, you open your account and start depositing money. This is a savings account, so you only end up with as much as you put in. You can put in as little or as much as you like. It is even possible to have money automatically deposited into many Health Savings Accounts. This money can then be used for approved health care expenses, ranging from doctor visits to dental care to prescriptions.
Eligibility requirements for the HSA
In order to be eligible for a Health Savings Account, you must have a high deductible Health Plan. This is a plan with a high out of pocket requirement for the insured. To qualify, your minimum deductible needs to be at least $1,100 for self-only coverage and $2,200 for family coverage. Additionally, your out of pocket expenses cannot exceed $5,600 for self-only coverage and $11,200 for family coverage. Other than that, there are no eligibility requirements based on income or health.
Using a Health Savings Account
If you set up an HSA for your use, it is important to make sure that it is cost-effective for your situation. For those who have relatively few health care expenses each year, this can be a good move. Your high deductible plan likely has a much lower premium, so you can save the money and then use funds from your HSA to cover doctor visits, dental care and eye care. The health insurance plan then mostly becomes something that is used for large, unexpected and catastrophic expenses.
Those who have chronic health problems, though, should consider that a high deductible program may not be the best option, since you will be paying out of pocket for a great deal of care, and paying your premiums. Additionally, some high deductible health plans come with restrictions on how much is covered in a year, and other restrictions. You want to double check the restrictions present in any high deductible plan you are considering.
In the end, it is up to you to plan for your health care needs. Health care reform in Congress is likely to be less than effective in actually constraining costs. Proper planning is required to keep from becoming one of the many who find themselves declaring bankruptcy due to health care costs and medical bills. Do your own research, or consult with a financial professional, to look into whether or not a Health Savings Account can provide you with what you need to more cost-effective way to take care of your needs. You can find out more about HSAs from the Treasury Department.