Health Saving Account or HSA is saving account opened with the financial institutions to take care of the medical expenses, its simply putting the certain amount a side every month to take care of the major expense incurred later and unspent amount keep getting roll over and accumulate each year. The purpose behind giving a birth to Health Saving Account is to take care of the medical expenses of those individuals having the high deductible health insurance plans.
High deductible plans are the one that don’t start paying until you spend certain specified limit say for example $1250 (Individual) or $2500(Family) from your own pocket first on health care expenses, you can use your HSA account to pay these deductible or some copayment or other uncovered expenses of your health plan.
The primary objective of this reform is to reduce the growth of health care costs and increase the efficiency of health care system. By choosing the health deductible plans, individuals are shelling out a low premium out of their own pocket as plans with low or no deductible are supposed to be pretty expenses and simultaneously putting your own money into HSA count will make the individual more responsible and encourage them to take wise decision to spend on needed health care.
You not your insurance company or your employer own and control the money in your health saving account, it works in a similar manner like your bank saving account-you will get a debit card with a 4 digit pin and you can easily pay with it for all of the eligible expenses, some of the employer also contributes to your HSA account and IRS has a set individual contribution limit for each year, your contribution into this account is going to fetch you the tax benefit too – if you are contributing through your employer – you can deposit money into HSA on a pretax basis and if you have open the HSA of your own, you can deduct your deposits when you file your income taxes.
The another biggest question pops up in everyone’s mind when they put their own money either through themselves or through their employer that whether they have an option to withdraw the money from HSA account for non medical expenses – fortunately or unfortunately the answer is Yes but they have to pay a 20 percent penalty and taxes on the money they have used for non medical expenses, however this condition is applicable to all individuals who are under the age of 65, if you are above 65 then you are not supposed to pay penalty on withdrawal from HSA for non medical expenses but you must be paying the taxes on the withdrawal money, so a long story short – withdrawal from HSA for non medical expenses is not a good option to avail.
HSA has its own pros and cons like other health care options-weigh your available option, consider your budget and make a sensible healthy and wealthy decision.
Happy Health !!!