Save Money on Health Care: Health Saving Accounts

By Alden Smith

Medical Discount Plans - Dental Discount Plans - Prescription Discount Plans - Patient Assistance Programs - Health Savings Accounts

In 2003, Congress passed legislation creating Health Savings Accounts. Although research shows that people know little about them, they are well worth investigating by people wishing not only to ease medical expenses, but to look at their tax positions in the process.

The Clinton and Bush administration and nearly all federal lawmakers in both the Democratic and Republican parties feel that HSA's are a big part of the solution to the national health care crisis. Insurance companies and the employee benefit industry strongly support the use of HSA's. And business think tanks around the country focus on ways to expand the use of this financial tool in the marketplace. Kiplinger's Personal Finance Magazine advocates for HSA's, especially if you are self employed.

Generally speaking, a Health Savings Account is comparable to a 401(k) or a traditional IRA. Combined with a high-deductible insurance policy to meet catastrophic needs, the HSA will cover such out of pocket expenses as routine doctor visits, yearly checkups, and non emergency situations. Typically, a family can put as much as $5,150 into the account yearly, and an individual can put aside $2,600 annually. One of the best things about these accounts, besides being tax-free, is that you can carry over unspent money from year to year.

It matters little who you work for or where, as the HSA is completely portable. In many cases, it is very possible to realize large savings on yearly insurance and medical expenditures. Because you are not tied to any insurance plan's network doctors or medical group, you are free to choose whoever you want for your medical needs. Worries about being canceled by your insurance company are no longer an issue, because the HSA is owned by you.

Another great feature of health savings account is the opportunity to save. If you have a traditional IRA or 401(k) you get a deduction on your taxes each year for all contributions made, but after age 65 all distributions are taxed at both the federal and state level. This would include any capital gains made over the savings years, with the exception of the Roth IRA. But with a health savings account, money withdrawn for qualified medical expenses are never taxed, and you get the same benefits as with IRA's and 401(k)'s. Also, with a health savings account, there is no age restriction when you withdraw funds as there are with the more traditional accounts. The only exception to this is that health savings accounts are able to be withdrawn after age 65 for any purpose, without penalty, although you would now not be exempt from taxes.

Although the HSA is touted as being very desirable, they are not without certain drawbacks. Typically, the population benefitting most from an HSA will be young, self employed people with no history of high medical expense. People over 60 years of age would only realize improvement of the quality of health care, because they are moving beyond the traditional managed health care system. And it must be remembered that an HSA is not a stand alone account - it must be combined with a high-deductible health insurance plan. A person must also qualify for an HSA, and it may not be an advantage for those with high medical costs.

Considering a health savings plan is a good idea, especially for the self employed. When self employed, you may deduct 100 percent of health insurance premiums on your annual taxes. You will also benefit from the reduced cost of having a high deductible health insurance plan. It must be remembered, however, that the HSA should be viewed as a long term investment in your health care - you must contribute into the plan for a period of time before it can become of benefit to you.

Health savings plans are a good thing to investigate if you are considering the high cost of health care, wish to provide yourself with a tax shelter, and are reasonably healthy. They can be viewed as a savings account, and that is a good thing, considering the tax advantage. Investigating a health savings plan is easy - there are many resources, such as www.healthsavingsaccount-HSA.com and www.FreedomBenefits.org that gives detailed information on both the benefits and drawbacks of a health savings plan. And because a health saving plan should be considered a long term investment, help on short term insurance issues can be found at www.MedSave.com. Investigate today - the help and information is out there.

Medical Discount Plans - Dental Discount Plans - Prescription Discount Plans - Patient Assistance Programs - Health Savings Accounts

Alden Smith is an award winning author and regular contributor to DoItYourself.com. He writes on a variety of subjects, and excels in research.

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