Pick up a newspaper, read an online article, or listen to the evening news. On any given day, chances are you will come across something about the high cost of health care.
When asked if they would like to have more control over the cost of their health care, most people answer yes. Almost 48 million people in the United States do not have health insurance, largely due to the rapid rise of health care costs.
A health savings account (HSA), in conjunction with a high deductible health plan (HDHP), gives consumers another option - an account to pay for minor medical expenses on a tax-favored basis. Contributions to HSA’s are tax-deductible, and eligible withdrawals from accounts are tax-free.
HSA’s are becoming increasingly popular as consumers seek ways to have more autonomy over their health care expenditures. HSA’s allow consumers to draw from their account for a wide array of medically qualified expenses, such as massage therapy, chiropractic care, laser eye surgery, contact lenses, smoking cessation programs, inpatient drug addiction therapy, oral surgery, acupunc-ture, contraceptives, fertility treatments, weight loss programs and several other expenses.
A very attractive feature of an HSA is that consumers can use the funds in their accounts for family members, even if the family member is covered under traditional insurance. For example, David has an HSA for himself and his children, while his wife Stephanie is covered under a traditional PPO plan through her employer and is not eligible for an HSA. David can use the funds in his HSA to pay for Stephanie’s $35 co-pays at her doctor visits as well as paying for her over the counter and prescription drugs.
Funding of an HSA can be done monthly, quarterly or annually. In 2007 a law was passed that allows a one-time 1035 exchange from a 401K or an IRA to fully fund an HSA. Any unused money in the HSA at the end of the year is rolled over and grows tax-deferred year after year. At age 65, the money in the account can be used to pay for Medicare Part A or B tax-free. Once the account owner reaches age 65, the funds in the account can be taken out at any time and used for any purpose without penalty (funds are taxed as ordinary income), turning the HSA into another retirement account.
HSA owners tend to have more wellness-oriented behaviors, which make them a better risk for insurance companies, creating lower costs for employers, insurance companies, and ultimately the consumer.
About Terry Soulé
Licensed in both North and South Carolina, Terry brings several years of experience to help facilitate your insurance planning. Terry represents some of the most trusted names in the insurance industry, and provides you with a personal consultation to help you make an informed decision about your health insurance needs. You may contact Terry at 803.325.5549 or terryinsures@yahoo.com.