Health Savings Account Financing Benefits Tax Advantage

A Health Savings Account (HSA) is a tax-advantaged savings account designed to give you more control over your healthcare expenses while saving you money. HSA’s are typically used in conjunction with high deductible health plans (HDHP), health insurance plans that require you to pay for a significant amount of medical expenses out-of-pocket before your insurance company will cover anything, but charges you low premiums in exchange for setting a high deductible. The money in your HSA is meant to be used to pay for qualified medical expenses that go toward meeting your deductible. Once you meet the deductible, your insurance company pays any subsequent healthcare expenses covered by your plan.
Financing an HSA

HSA contributions and withdrawals are subject to several rules and regulations that affect how much you can save and spend on health insurance:

· Contributions and interest earned in an HSA are tax-free, and withdrawals from the account that pay for qualified medical expenses are not taxed, either. However, if you spend money from your HSA on non-qualified expenses, the amount is taxed in accordance with your gross income, along with an additional 10%.

· HSA contributions are capped. In 2009, the maximum contribution for individuals was $3,000, and $5,950 for families.

· You are not required to contribute the maximum amount each year, but some HSAs require a small monthly minimum contribution.
Benefits of an HSA

Despite these stringent regulations on HSAs, they offer several advantages that can help you save money on your medical bills:

· Lower premiums on your health insurance plan

· Up to a 30% reduction in out-of-pocket costs for medical expenses

· Control over your investment strategy

· Tax-free interest on cash in your account
· Funds carry over each year

· Continued eligibility and enrollment even if you change jobs

HSAs aren’t for everyone, but they can offer huge benefits-both for your finances and your health-if you only need minimal medical care, want flexibility with your healthcare expenses, but still want to insure against disaster.