What is a Health Savings Account? And Why It is So Important to Have One If Offered
A Health Savings account, which is commonly just referred to as an HSA account, is the type of bank account that you get with the High Deductible Health Plan. And while it is certainly no substitute for having a good insurance deductible, it is definitely something that can be an awesome part of your financial planning schema if the truth is that this is the type of account and insurance plan that your employer offers. As someone who has recently had to go to multiple doctors appointments over a course of a few weeks, buying antibiotics, hitting the dentists office, going to the eye doctor for an expiring contact prescription and having to buy contacts, I’ve had to spend as much as like $750 over the past few weeks on medical, and I was glad that a decent amount of it was at least covered by my insurance HSA account. And so, in this blog post, I’ll walk you through some of the benefits of using your HSA, and will walk through the question of what is a Health Savings Account,, and how it can save you money? Be sure to read on or subscribe to our blog for additional details and information.
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What is a Health Savings Account? Why Everyone With a High Deductible Health Plan Should Get One
The Health Savings Account, in a nutshell, is a triple taxed advantage savings account in which Insurance companies offer this as a sort of compensation for the fact that your deductible is so high. For instance, I use Anthem Blue Cross Blue Shield for my Insurance carrier, and my deductible is $3,000.00, which is miraculously high, and being still in my twenties, its unlikely that I hit this at all each year (by keeping my premiums under $40 per month however, I am essentially just filling up my bank account with the premium money and am creating my own “Captive Insurance Company” for my medical care.) With the Health Savings Account however, my employer gives me like $400 or so towards my medical each year to use, and I also have the advantage of making HSA Contributions which give me an instant tax write off on the money (basically a way of writing off medical expenses to the fullest extent.)
On top of this, you also get a tax advantaged investment account. So at my job, once I have more than $1,000 in the HSA account, I can put the money into any investment vehicle of my choosing. So while I have $8,000.00 parked in my HSA in case shit hits the fan with a health issue, I can earn interest on interest and can continue to grow my savings in that account, I can also withdraw dividends or take cash out of there (though there are some penalties) if I need to.
The Tax Advantages of Using a Health Savings Account
The Health Savings Account is what we in the finance and insurance world call a “Triple Tax Advantaged Savings account.” Money going into the account gets a tax write off, and money spent from the account is taxed free, AND investment gains in the account are tax free if used for qualifying medical expenses. Not a bad deal at all, and if you don’t mind tying up a little bit of liquidity, and especially if you are feeling secure in your current employer and if you see medical bills building up in the future, it may very well be worth it to make some contributions to this type of account. it is by far the most powerful advantage of the High Deductible Health Plan, because the $3,000.00 deductible surely is not.
Final Thoughts on The Question of What is a Health Savings Account? The Pros and Cons of Having One of These
And so those are my thoughts on what a Health Savings Account is, and why it is worth it to invest in this triple tax deferred investment account. For more information on all things Finance, Business, Insurance, and personal investments, read on or subscribe to our blog for additional details and information.
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