7 Things to Know about Health Savings Accounts (HSA)

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Individuals can enjoy lower premiums as well as lower taxes by purchasing a health savings plan. However, it is wise to consult an expert benefits specialist who is familiarized with the insurance companies that offer high-deductible policies and are eligible for HSA account participation before you make the switch to an HSA. There may be situations where the savings may not materialize or are not worth the sacrifices.

The popularity of health savings accounts (HSAs), is astounding. The so-called “consumer-driven” health plans have attracted 2.5 million Americans since their introduction in 2004. HSA plans, however, are not right for all.

Guidelines Will Help You To Determine If An HSA Would Be A Benefit For You and Your Family

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1. Many people can save on healthcare costs with an HSA plan

Some people won’t realize any savings. People who can afford all their insurance premiums (e.g. self-employed) and are in good health with minimal medical expenses will be most likely to see significant savings.

2. Health savings plan restores freedom of choice

Individual consumers are able to take control of their own health care through an HSA plan. This also means that each person must take more responsibility for his or her health care decisions. This type of self-reliance is not appropriate or popular for everyone, especially for those who have grown used to HMO-type “copays”.

3. Health savings accounts reduce income taxes

Every dollar that you contribute to an HSA account is taken out of your taxable income, just like contributions into a traditional IRA. HSA investments and interest earn tax-deferred. Except for IRA withdrawals, they are exempt from tax if used to pay qualified medical expenses.

Many times account holders who have not had to pay premiums for a higher-priced plan can fund their HSA almost completely with the money they save. Account-holders can save instant money by investing all or most of their savings into HSAs. This will allow them to reduce taxes.

4. You need to have a qualified high-quality health insurance policy before you can apply for it

A health savings account can be opened. HSA plans have a common misconception that insurance policies with high deductibles will be eligible for an HSA account. The IRS regulations are specific. It is not enough to have a policy with a “high deductible”.

It is crucial to ensure you are covered under a properly qualified policy. You should work with a qualified, licensed broker who is skilled in the marketing of HSA plans.

5. For the HSA-qualified, health insurance policy to be valid, you must have coverage

Many people do not have an HSA-eligible insurance policy that is qualified with a high deductible. This means they will need to switch to other insurance plans. A new high deductible policy, unless coverage is being offered under small-group reform laws (general groups with 2 to 49 employees), will need to be underwritten individually by an insurance company.

This could mean that certain “pre-existing conditions” may not be fully covered. Some companies may also offer to cover “pre-existing”, in exchange for slightly higher premiums. Unfortunately, certain health conditions can make an individual uninsurable.

Examples include diabetes, chronic’s disease, heart attack, and others. There are many state requirements for underwriting, making it important to use an experienced broker who is knowledgeable in the field of health plans.

When managing your existing medical expenses is more important than saving on premiums for medical insurance, it’s best to not switch to an HSA plan. You should not make changes to your health plans during ongoing medical treatment, after a major diagnosis has been made, or if a member of your family is pregnant.

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It is usually relatively simple to get approved, i.e. no medical exams, etc. HSA coverage can be offered by most insurance companies based on the answers to your application, possibly with a telephone interview. Companies reserve the right to request medical records in certain cases.

6. HSA insurance premiums can be quite low

One reason is why this happens. This is because the underlying policy is simply a policy for health insurance. It may have a “high” amount of deductible as required by law.

However, the insurance company must compensate for the risk it assumes by charging premiums. Many companies offer policies with a single deductible that all family members can contribute to. It is not unusual for premiums to be comparable for a 5000 family plan with 100% coverage after your deductible.

An HSA plan offers lower premiums as one part of its lower net costs. When you consider the tax-deductible contributions to HSA accounts, the HSA plan will have a lower net cost. You might want to consider a non-HSA policy with a high deductible if your primary concern is obtaining the lowest gross premium.

7. The best way to control the rises in your insurance rates is with an HSA

You will experience rate increases as a result of your HSA insurance policy. HSA-qualified policies are still health insurance policies. This means that there is no reason to believe an HSA policy is immune from rate increases needed by an insurer to continue paying claims and remain in business.

You can expect future rate increases to be much lower than those for traditional health insurance plans (regular PPOs and HMO plans). This is because insurance companies base increases on percentages. A lower percentage of a base premium means a lower dollar increase. Although it’s not the ideal solution, it is cost-efficient and works for many qualified people.

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