Health plan options can be confusing and with the A.C.A. in full effect, we wanted to highlight one of the plans that many people are not familiar with. What is a Health Savings Account or H.S.A.? This is a high deductible health plan that enables individuals to create a savings account to contribute funds that are not subject to income tax. This account can be used to pay for “qualified medical expenses” tax-free. When an individual selects an H.S.A. qualified plan premiums are typically lower and deductibles are higher.
Traditional health plans in comparison commonly cover co-pays for doctor visits and prescriptions, whereas H.S.A’s usually do not. In choosing an H.S.A account an individual pays for the full cost of medical expenses out of their H.S.A.. Health benefit providers often give a discount for medical services that are paid in full at the time of service.
A Denver based insurance advisor, Greg Lackey, is an advocate for H.S.A.’s and stated that “The H.S.A gives an individual a triple tax savings”. What exactly does he meant by this? The first savings is due to your contributions reducing your taxable income, the second are earnings on the account build tax free, and lastly distributions for qualified expenses from the account are not subject to taxation. Given this knowledge is an H.S.A. something that you will look into during next open enrollment? (For a printable list of qualified expenses click HERE)