The HSA, What is it?

The HSA stands for Health Savings Account. Simply put it is an insurance policy paired with a savings account. Personally, I love them. To me the HSA is a great insurance policy for people of all walks of life.

If you a sickly person the HSA is appropriate, because it reduces your out of pocket costs to your deductible, On the other hand, if you are a healthy person that rarely sees the doctor, it provides a tax break on your health insurance costs, and it allows you to build up a savings account to cover any medical costs up to the deductible amount.

A typical HSA has a deductible that can range from $1100.00 up to $10,000.00 depending on the company that you choose and your personal preference on premiums and deductibles. Typically after you meet the deductible, the HSA then covers your health care costs at 100%. There are exceptions to this, in that, some companies offer the HSA with 80% coverage after the deductible is met.

That is the gist of the HSA. Complicated? No. It is very simple. Now there are additional benefits for the HSA that are not commonly in your traditional 80/20 plans. The additional benefits are in the form of your money.

You contribute in a HSA to a savings account that you set up concurrently. You can choose any approved HSA savings account to invest into, on a monthly basis.

Say for example that you have an HSA that pays 100% after the deductible. Your deductible is $2850 for the year, and you contribute $300 per month into the savings account.

If you are a sickly individual that sees doctors each month, then the deductible will be exhausted rather quickly and then for the remainder of the year your health care is then covered at 100%. You continue to contribute every month into the savings account, and that gives you a leg up on meeting next year’s deductible. What is the benefit to this? There are many; small deductible that is easily achieved and paid for using the savings account, a generous tax break at the end of the year, should something else happen your have 100% coverage, and you are still building the amount in the savings account so that you will have the deductible covered with less out of pocket than the year previous.

If you are healthy and have no medical expenses throughout the year, then you reap the benefit of accumulating $3600.00 into the savings account for use on future claims. This plan is a huge winner on all accounts.

Check IRS publication 501 at irs.gov to find over 40 pages of deductions that use can use your HSA savings account.

The HSA, it can change the way you look at health insurance.