H-S-A: the smarter way to plan for unexpected Medical Expenses

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In the year 2003 introduction to a new-age plan came into being when Health Savings Accounts were launched through a bill by Medicare. Health Savings Account or HSA is considered as one of the most necessary things by most Americans.

FUNCTIONS:

  • HSA are considered as an alternative to the regulation or rather traditional health insurance wherein paying of premiums is not involved.
  • In HSAs are basically tax-free accounts where one can deposit money themselves are have the same deposited, wherein funds in these accounts will only be used for paying up medical expenses for present and future.

Following are the three ways in which we can fund these accounts:

  • Tax-deductible contributions can be made by an individual or family.
  • Employer can provide tax-free contributions.
  • Through a cafeteria plan by the employer, one can also make tax-free contributions.

The most important part is that, the funds which are deposited into a HSA can be multiplied or grown by investments like stocks, mutual funds, bonds, etc. This is similar to owning and controlling the money that you own. You can not only decide where to invest that money but also how to spend it. This is very unique difference between a HSA and regular Health Insurance Coverage plans, where your insurer decides majorly.

HOW TO GET A HEALTH SAVINGS ACCOUNT?

  • The first step towards getting a HSA is to get a coverage under HDHP (Highly Deductible Health Plan). HDHP is generally a very low-cost insurance plan with though does not cover the quite an extent of initial medical expenses, unlike other medical insurance. That is why this plan at times is also known as the “catastrophic” plan.
  • Once the requirement, for saving money for paying the initial expenses not covered under HDHP, arises, one can apply for opening a HSA.
  • HSA can be opened at banks, credit unions, insurance companies, or any other approved institution.
  • As per revised updates of 2006, no costs are involved to open a HSA, however, the HDHP deductible as mentioned earlier should be at least $1050(individual) and $2100(family).

CONTRIBUTIONS:

  • Contributions cannot be made into a HSA as per free will. The amount has to be equivalent to the HDHP deductible. That is if you have a HDHP deductible of $1050 as an individual, then you would be allowed to deposit only $1050 per year.People over the age of 55 are exempted from this norm and are allowed to deposit extra amounts till such they gain eligibility for Medicare.
  • Generally people make contribution into HSA by deposited one sum of money. However, there are certain institutions which have minimum contribution norm. This should be well known by us to save time and energy.

CONCLUSION:

Though at times Heath Savings Account might look painstaking work but this can be a useful tool to go ahead and acquire medical insurance at reasonable rates. The US Treasury can provide much more valuable information on the advantages of a Health Savings Account.


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