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Health Savings Accounts: An Alternative to Traditional Health |
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If you’ve been following the news lately, you’ve probably
heard about the contentious issue of Health Savings
Accounts, introduced by the Bush administration in 2003
through the Medicare Modernization Act. At that time the
concept generated little buzz – only recently has the
debate heated up between critics and supporters of the
initiative.
If you’ve been following the news lately, you’ve probably
heard about the contentious issue of Health Savings
Accounts, introduced by the Bush administration in 2003
through the Medicare Modernization Act. At that time the
concept generated little buzz – only recently has the
debate heated up between critics and supporters of the
initiative.
A Health Savings Account offers people a second choice when
it comes to signing up for health insurance. It’s not a
replacement for health insurance, but instead, combines
aspects of personal savings with the complete coverage
offered by a health insurance plan. Many defenders of HSAs
believe it offers the best of both worlds so that patients
can have more control over their own healthcare needs and
save money in the process.
But what exactly does a Health Savings Account entail?
Basically, a Health Savings Account is a savings account
(set aside for the purpose of paying future medical costs)
in conjunction with a high-deductible health insurance
policy. If your employer or insurance company offers HSAs,
you are given the option to deposit money into the savings
account, up to a set amount. The deposit remains tax-free,
even when you withdraw, and gains interest over time – just
like a traditional savings account. The difference, of
course, is that the money must be used to cover medical
expenses you incur up to the deductible amount. So if you
need to buy prescription eyeglasses, visit the doctor, or
take an eye exam, you would withdraw funds from the HSA in
order to pay those bills. HSAs can be used to pay for a
wide range of healthcare expenses, not traditionally
covered by health insurance.
The good news is that once you reach the deductible amount,
your insurance coverage kicks in and you can use that to
pay any additional medical bills you are responsible for
during the rest of the year. Another positive aspect of a
Health Savings Account is the fact that with a
high-deductible insurance plan comes low monthly premiums.
If you have little to no healthcare costs during the year,
you will save a lot of money on premiums alone. At the same
time, your savings account will gain interest and roll over
to the next year. After several years, even if you need to
make withdrawals to pay for certain medical expenses, you
should have a significant amount of money set aside for a
rainy day.
In addition, once you turn 65, you can withdraw any
leftover funds to use for your retirement – and the balance
remains tax-free. You can use the money for medical
expenses, of course, or for any other expenses you have
during your retirement years.
Opponents of HSAs argue that only the healthy and wealthy
can afford to take advantage of the opportunities Health
Savings Accounts offer to the public, while proponents of
the plan believe this type of health insurance has the
potential to give the average person more power to make
informed healthcare choices. Only time will tell whether or
not Health Savings Accounts have the potential to
revolutionize healthcare in America.
About the Author:
Lisa Ip is president of Uniforce Insurance, which she
founded in 1994, in Madison Heights, Michigan. For more
information regarding health insurance in Michigan, visit
http://www.uniforceinsurance.com or call 888-302-RATE
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