An IRA for Health Care
Simply put, a Health Savings Account (HSA) is a tax-advantaged way to pay for health care. It works like this: an individual buys a high-deductible insurance policy to cover major medical expenses, and then sets money aside each month in a specially designated health savings account - that’s the HSA part - to pay for eligible medical expenses. The health savings account is owned by the individual, which means money not used one year can be rolled over into the next. If there’s a job change, the HSA moves, too. Money earned in a Health Savings Account accumulates tax-deferred, and whatever is withdrawn for eligible medical expenses is also tax-free.
Eligible Medical Expenses?
HSA savings can be used to pay for many eligible medical expenses beyond what is covered by your insurance plan. These expenses include services, vision, alternative medicine, long-term care services, prescription drug and certain over-the-counter drugs. For a complete list of qualified medical expenses see IRS213(d)eligiblemedicalexpenses.pdf.
Can Anyone Use an HSA?
Anyone who is not entitled to Medicare can accumulate tax-favored savings for healthcare needs. You don’t have to be self-employed.
HSA Qualified High-Deductible Health Insurance
You must have a qualified high deductible plan to receive the benefits. The current minimum deductible amounts are $1,100 for a single and $2,200 for a family and meets other federal requirements. Premiums charged for these policies can be anywhere from 20% to 50% less than those for traditional, low-deductible plans.
Designed to Cut Health Care Costs
Proponents of HSA plans say they will create more astute health-care consumers. When individuals pay for office visits and prescription drugs from health savings accounts they themselves fund, they will be less likely to run to the doctor for every minor ailment and more likely to ask about cheaper generics. There is a disconnect between patients, doctors, and the cost of medicine. A patient has no idea if a drug costs $20 or ten cents a tablet, and the way the system is set up today, doctors have no reason to explain the difference.
Need Assistance?
You can find a wealth of health insurance information throughout our site. If you would like to speak to someone, call us for free at 800-557-5693. We are here to help 9 AM to 5 PM Pacific time.
