Even with the savings of health insurance, many policyholders still want to save money for their medical needs. Some insurance customers can put money away using a Health Savings Account (HSA).
What are HSAs?
Health Savings Accounts (HSAs) evolved out of the idea for health insurance policyholders to set away money with tax-deferred status. By setting aside money, policyholders could then better afford their medical needs.
Sometimes, health insurers themselves offer the HSAs. Otherwise, many Americans choose to open HSAs with a bank of their choice.
How do HSAs Work?
Each year, certain policyholders can set aside money in an HSA to help them pay for medical care. Some HSAs roll over from year to year, and can accumulate interest to help their owners. This might lead to significant cost savings on health care.
Nonetheless, HSAs come with various regulations that govern how consumers use the account.
- Most HSAs only come with high-deductible health insurance policies. High deductibles sometimes mean that the health insurance policy costs less. However, the law determines what qualifies as a high-deductible health plan. In 2017, the minimum qualifying deductible for an HSA is $1,300 for an individual and $2,600 for a family.
- Individuals have a degree of leeway to determine how much money they put into the HSA. However, the law says that savings cannot exceed maximum limits. The maximum limit for individuals is $3,400 and $6,750 for a family. Older individuals can often add more money.
After Enrolling in an HSA, you will likely receive a debit card from your account manager. This helps you spend money solely dedicated to the HSA.
You can use these funds to pay for medication, co-pays, deductible costs and other health needs. These funds may also help you pay for medical expenses that your insurance doesn’t cover. However, before using funds from your HSA, make sure they qualify for use on the expense. If they don’t you may face taxation on these funds.
Tax status of HSAs
One thing that many HSA carriers look forward to is the tax-free status on the money in the accounts. Essentially, you pay taxes only on income you don't contribute to the HSA. For many, this means paying for care at the rate of someone who make less money than you.
However, to qualify for the untaxed status, you must use the HSA money for qualified medical expenses. You may have to report your HSA funds to the IRS when you file your taxes. Funds you have not used for qualified expenses may still face taxation.
When setting up an HSA, take the time to learn more about how it can benefit you. Also learn how to deposit and spend your HSA appropriately for maximum savings.
We’ve got you covered. Call Salzberg Insurance Agency at 877-757-6081 for an instant, free health insurance quote.