Sunday, April 18, 2010

All about health insurance savings

If you have been asking questions about healthcare coverage you have definitely heard about health savings accounts (HSAs). Some people advocate that they are the next step in the domain of health coverage, while the others believe that only healthy and rich citizens can benefit from such plans. Before answering these questions it is better to learn what HSAs are in essence and how do they work.

What is a HSA?
A typical health savings account is comprised of two elements:

1) Savings account with interest bearing:
- Yearly deposits of up to $2,900 ($5,800 in case of a family) introduced to the savings account are to be taxed. The money deposited will usually roll over on a yearly basis. However, the money you withdraw from the account for healthcare purposes are tax-free. So are any withdrawals after you officially retire.

2) Healthcare coverage plan with a high deductible
- The minimum deductible amount should be not less than $1,100 ($2,200 in case of a family). That is the amount of money to be paid out-of-pocket before getting the actual benefits.

- When the annual deductible is paid the actual coverage kicks in. You will have to pay all the specified co-insurance and the plan will cover all that remains.

- The overall amount of money to be paid out-of-pocket is limited to $5,600 ($11,200 in case of a family). In other words, after you have spent $5,600 on healthiness services your insurance company will pay for all health costs exceeding that amount.

What are the pros of health savings accounts?
- Because of the fact that any money withdrawn for healthcare use is not taxed, HSAs are a good way of saving more money in your pocket.
- In case you keep the funds without withdrawing them from the account you will have more money after you retire. And since you can freely withdraw the money for any reason after you turn 65 it is a good additional source of retirement money.
- Health insurance plans with higher deductibles have lower premiums than typical plans.
- HSAs don't depend on your working place and you will keep it the same no matter what.

What are the cons of healh savings accounts?
- Those who have substantial needs in healthcare services will find little use in HSAs since they provide main benefits when the money is kept in the account for an extended period of time.
- People with serious health issues will find it hard to get high-deductible insurance plans, especially if they were already denied of typical plans.
- Some HSAs have additional fees that in sum can make the plan quite costly for the customer.
- Because of high out-of-pocket expenses people tend to go without care, which usually results in complications and more serious and expensive health concerns.

Will a HSA be useful for me?
In case you have no serious health problems and are able to pay the required out-of-pocket expenses than HSAs will definitely be a good option for you. However, you must understand that HSAs require you to be more conscious about your medical costs and the coverage provided by these accounts is much less comprehensive and diverse than with typical health insurance plans. Having an active position in managing own healthcare is a must with HSAs, so if you're not ready for that then it will be not of a much use to you.


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