Let’s talk about HSA Insurance.
Unless you were born yesterday, you know that healthcare costs can be staggering. And even if you have a great health insurance policy, you could still face difficult medical bills due to office visit copays, coinsurance, deductibles and prescriptions.
If you want to help mitigate the “pain” you feel when you receive your next bill, a health savings account could be the way to go. But it’s important to understand what a health savings account is – and what it isn’t – to determine whether it’s right for you.
10 Facts about HSA Insurance
- It’s tax free. The basic idea behind a health savings account is that it allows you to set aside money before taxes are taken out of your paycheck. That means you’ll be spending tax-free dollars on qualifying medical expenses (we’ll get to that).
- HSA insurance funds only apply to qualifying medical expenses. While the IRS provides an extensive list of these expenses, some of the more common fees are office visit copays, dental care, hospital care, prescription drugs and any medical equipment prescribed by your doctor.
- Not everyone qualifies. To qualify for an HSA, you’ll need to be enrolled in a qualified high-deductible health insurance plan. Keep in mind that not every high-deductible plan qualifies for an HSA. Your health insurance advisor can help you select a plan that qualifies you for an HSA.
- It keeps accumulating. While you’ll be adding to your HSA each month (most likely), you won’t feel the pressure to spend that money. Unlike a flexible spending account, wherein funds “expire” at the end of the year, your HSA funds will roll over into the new year, so you can keep them around for when you need them the most.
- It’s limited. Tax-free money is great news for anyone, but that doesn’t mean you can contribute your entire paycheck to your HSA. There are limits to how much money you can set aside each year to your HSA. Your healthcare advisor can help you understand exactly how much you can (and should) set aside.
- It’s an investment account. Your HSA account works similarly to a 401(k) or IRA account. Your HSA insurance money could be used to invest in stocks, bonds, mutual funds and CDs.
- There could be fees. As we said before, basically, your HSA is an investment account provided by a financial institution. And just like any investment account, there could be fees or charges associated with your account. Make sure you get all the information before you set your account up.
- Medicare disqualifies you. If you enroll in Medicare, you are no longer allowed to contribute to an HSA account. That said, if you have funds in an HSA that have accumulated over time, you are still free to use those funds for qualifying medical expenses – which include paying your Medicare premiums, deductibles, copays, etc.
- It may not be for you. Just because you qualify for HSA insurance, that doesn’t mean it’s right for your particular situation. For example, if you don’t make enough money to cover 100 percent of your costs before you reach your deductible, you may want to opt for a lower-deductible plan, in which case you wouldn’t qualify for an HSA insurance.
- You can’t have other healthcare plans. If you’re covered by another health insurance plan (aside from your high-deductible plan), chances are, you won’t qualify for a health savings account. To determine your eligibility, talk to your healthcare or financial advisor.
Got an HSA? Would you recommend it to your friends? Tell us what you think!