Health Savings Accounts, or HSAs, are one of the most useful but frequently overlooked forms of health insurance available to the average consumer.
A combination of savings account and health insurance policy, HSAs allow consumers to save money on the cost of health insurance while taking advantage of tax-free savings. However, there are a few things to keep in mind when trying to determine if a HSA is the right thing for you.
Deductibles: Part of the savings associated with HSAs comes from a high deductible, usually ranging from $1,100 (the minimum) to $5,600. In fact, the actual insurance policy is often called a high-deductible health plan (HDHP), with the HSA denoting the actual savings account where the pre-tax savings are held.
Choices: Much like other health insurance policies, there is a wide range of different coverage options, including in-network/out-of-network, prescription drug benefits and other choices to be made. It is essential to work closely with a knowledgeable agent in order to select the right high-deductible policy.
Fees: Depending upon your selection of savings account, a bank or credit union may charge an annual fee for overseeing the distribution of funds from the account. Because you determine how to spend the money in the HSA, no third-party or health insurance provider is required. However, you may also be required to make decisions related to the investment of those same funds depending upon the account selected. Annual contributions, plus combined earnings on the investment portion, may generate substantial returns that roll over from year to year, making HSAs an especially attractive option for those wishing to supplement health benefits during retirement.
Savings: One of the reasons behind the popularity of HSAs is undoubtedly the cost savings. Not only do the monthly rates for HDHPs tend to be significantly less than traditional health insurance coverage, but the total cost may also be less. Depending upon the terms of the policy, many HDHPs require little to no additional out-of-pocket expenses once the annual cap is reached (which is often the same as the deductible).