Health Savings Account Blog

While HSA plans can significantly reduce health care costs for many participants, some people will not achieve any significant net savings. Individuals most likely to save a great deal of money by enrolling in Health Savings Accounts are those individuals who pay their own health insurance policy premiums, which include self-employed individuals who are relatively healthy and have few medical expenses.

2. Health Savings Accounts help to restore participants’ freedom of choice.

An HSA plan gives control back to individual consumers when it comes to their health care choices and options. As a result of the increased control, HSA participants must also be more responsible for their own health care decisions. Being self-reliant and responsible for health care choices is not always the best thing for all consumers, especially those who may be more comfortable with HMO-type “co-pay” plans.

3. Health Savings Accounts reduce income taxes.

Every dollar that participants contribute to their Health Savings Accounts is deducted from taxable income in the same way that contributions into a traditional IRA can be deducted from income tax burdens. Additionally, interest from the Health Savings Account savings and from investments made through a Health Savings Account are tax-deferred, just like a traditional IRA. However, unlike an IRA, withdrawals from a Health Savings Account are tax-FREE when the funds are used to pay qualifying medical expenses.

Also, in many situations, new account holders can fund their Health Savings Accounts with the money they save on health insurance premiums from their prior traditional health insurance plan that have higher premiums than HSA insurance plans.

4. Participants must have a qualifying high deductible health insurance plan in order to enroll in a Health Savings Account.

Health Savings Account participants need to have a high deductible health insurance plan that qualifies for participation in a Health Savings Account – not just any high deductible health insurance account. If you have recently enrolled or are thinking about enrolling in a high deductible health insurance plan, it is important to make sure that your policy qualifies for Health Savings Account participation. You may want to work with a qualified health insurance policy broker who is experienced in identifying properly qualified Health Savings Account plans to be sure you open the right plan.

5. You must be insurable in order to qualify for the Health Savings Account - qualified health insurance policy.

If you do not already have a qualified high deductible insurance policy, you will need to switch your insurance policy plan in order to become eligible for a Health Savings Account. Unless your health insurance plan coverage is offered under small group reform laws through an employer, the high deductible policy will be individually underwritten by an insurance policy company. In some cases, “pre-existing” considerations may not be fully covered.

Alternatively, some health insurance providers may cover certain “pre-existing” conditions in exchange for slightly higher premiums. In some cases, health considerations will make an individual uninsurable (such as individuals with diabetes, Chron’s disease, or a history of heart attacks, etc.). Keep in mind that health insurance underwriting requirements vary by state, which is another reason to use the services of an experienced health insurance plan broker.

Also, keep in mind that you may not want to switch to a Health Savings Account plan when the management of existing medical expenses is more important to you than saving up-front medical insurance premiums. Also, it is advisable that you do not change health plans in the middle of ongoing medical treatments; after a significant health issue has been diagnosed; or if a covered family member is pregnant.

Generally, it is relatively hassle-free to qualify for a qualifying health insurance plan. Most insurance policy companies offering Health Savings Account coverage will issue the policy based on your answers to the health insurance application, which is sometimes accompanied by a follow-up telephone interview. In some cases, medical records may be requested by the health insurance policy provider. Moreover, some health insurance policy providers may require a health exam prior to providing the health insurance.

6. Although Health Savings Account health insurance plan premiums are low, they are not always as low as you might expect.

Health insurance premium rates may be higher than you expect, in some cases. Although qualifying health insurance plans have a “high” deductible, as required by law, the insurance company still must compensate for the financial it is assuming by charging premiums. Many health insurance companies offer health insurance policies with just “one deductible” limit that must be reached – and that all family members contribute toward. With these shard deductible plans, it is not uncommon for premiums for a $5,000 family deductible with 100% coverage after the deductible to be similar to a $2,500 “per person” deductible plan with 80/20 coverage after the deductible has been met.

Having lower health insurance premiums represent just one element of the lower net cost that is achieved with a Health Savings Account plan. In addition to these lower premiums, the low net cost of a Health Savings Account plan is achieved after factoring in the benefits of lower taxes, which are made possible by the tax-deductible contribution to the Health Savings Account. Thus, if finding a health insurance plan with the lowest possible premium is your main concern, you may wish to consider a high deductible, non- Health Savings Account policy, especially if you do not see the benefit to contributing to a tax-deductible savings account.

7. Health Savings Accounts offer your best chance to help control health insurance rate growths.

Even with the Health Savings Account policy, you will still see rate increases because your Health Savings Account-qualified policy is still a health insurance policy at heart. However, you can expect that the actual dollar amount of any future rate increases will be lower than traditional health insurance plans, such as regular PPO and HMO plans. This lower rate increase occurs because insurers base rate increases on percentages - and the same percentage of a lower base health insurance premium correlates to a lower dollar increase. Health Savings Accounts are not a health insurance or health care perfect solution-but it is the most cost-efficient solution for many qualified people.