Insurance Blog

A health savings account or HSA is maybe something new to some of us. This is also known as the Medical Savings Account for international users and is a great way to save some amount of money on medical and health insurance cost as it offers some helpful solution in controlling the high price of health insurance by paying less on your medical insurance and saving some money for your medical expenses. Allowing you to save much on your health care expenses in so many ways, health savings account is available to all taxpayers in the United States that are enrolled in a High Deductible Health Plan or HDHP.

One must keep in mind that a Health Savings Account is a one of a kind savings account that is tax-sheltered because at the time of deposit, the funds contributed to the said account is not subject to federal income tax. As a component of consumer driven health care, health savings account is unlike a flexible spending account wherein funds roll over and accumulate each year if not spent. With health savings account, a certain individual that differentiates them from a Health Reimbursement Arrangement owned by a company owns funds. The Health savings Account funds are used to pay for a qualified medical expense without any federal tax liability at any time.

Withdrawals made for non-medical expenses are treated the same as those in an IRA, wherein tax advantages are provided if take after retirement age. However, if taken earlier, penalties can be incurred.

One of the many ways that HSA can help you in your health insurance is when one have availed or enrolled in those with higher deductible, as HSA works hand in hand with these types of health insurance plans to help one save on medical expenses.

If you wonder, how this helpful medical saving HAS come into fruition, it was developed in replacement of the Medical Savings Account system. Signed by President George W. Bush on December 8, 2003, the HSA is a part of the Medicare Prescription Drug, Improvement, and Modernization Act.

How does the HSA work? It is way simple and easy to understand. Anyone like other person, the employer or the policyholder of an HSA-eligible high-deductible health plan itself ca deposit to an HSA. Any contributions made by the employer or employee can be made on a pre-tax basis through an employer. However, if this option is not available through an employer, post-tax basis for the contribution made is applied. The self-employed must note though that they are going to pay self-employment tax on their contributions.

All of the deposits made into an HSA will become the policyholder’s property regardless of its source. Deposited funds that are not used in the current year will be carried over to the next year. If ever the policyholder decided to end his or her HAS-eligible insurance coverage, he or she will immediately loose the eligibility to deposit funds. However, those funds that are already in the HAS will still be available for use.