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Health Savings Accounts, more co ...

Posted Jan 07 2009 6:54pm

Health Savings Account (HSA) Health Savings Accounts, more commonly known as HSA, were launched by the government in the 4Q of 2003. Initially the effectiveness of these health insurance vehicles was questioned, due to the slow adoption rate by Americans, but now five years later HSAs have proven to be a great way to save money if you understand them and utilize them properly.

With an HSA (paired with a high-deductible health plan ) you can save as much as 50% in monthly health insurance premiums.  Your deductibles will indeed be higher should you need to utilize health care but if you properly fund the Health Savings Account, using the money you saved by paying lower premiums this money can be applied towards covering the higher deductible.

Health Savings Accounts have tax advantages as well.  All of your contributions to your HSA — that’s right 100% — are tax free.  In addition the interest that accumulates on the money that you maintain is 100% tax free.  Furthermore, withdrawals from your HSA are 100% tax-free when used for qualified medical expenses.

In years where your health care utilization is low or non-existent, not only will you have saved up to 50% on your premiums, but the money that you used to fund the HSA was not taxed as income, and it has grown tax free in an interest bearing account.

At age 65, you can withdrawal the money from your HSA for any reason, and be taxed at the ordinary income rate.

As you can see by the above, there are many economic reasons why a health savings account is a good health care solution for your family, particularly if you and your family are generally healthy.

Health insurance companies are legally obligated to offer high-deductible health plans that that are eligible to be paired with an HSA, but the reality is, if they encourage their customers to opt for health plans with a higher deductible and lower premiums, they will cut into their profits.   Subsequently, health insurance companies do not always promote their HSA options as vigorously as other health insurance options.

If an HSA seems like the right health care choice for your needs, you can compare rates here at  Alternatively, if you plan to shop for your health plan from a agent or broker, be sure to ask about what HSAs are available.

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