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January 21, 2010
Are Health Savings Accounts Better than Flexible Spending Accounts?
Are you trying to get a handle on the many different employer-sponsored healthcare options that are currently available? If so, you’re not alone. In fact, we get many questions about the difference between two very popular healthcare plan options: flexible spending accounts and Health Savings Accounts. These two plans are similar, but Health Savings Accounts tend to give employees more control and financial benefits than the flexible spending account option. Here’s what you need to know about Health Savings Accounts:
Health Savings Accounts are savings accounts that employees can open with any institution that also offers IRAs. A Health Savings Account also operates similarly to an IRA, in that the funds that a participant deposits into the account can be invested into high-interest yielding stocks, bonds, and more. As such, Health Savings Account funds can help participants to grow their wealth.
But there’s more: Health Savings Accounts are tax-free, which means that the interest earned from investments is not taxed when the funds are used to pay for healthcare expenses. Moreover, funds deposited into Health Savings Accounts are tax-deductible, which reduces participants’ annual tax burdens.
Unlike flexible spending accounts, individuals who have Health Savings Accounts have greater control over the funds in their accounts – and these funds can be rolled over from year to year. Moreover, these Health Savings Account funds can be used to pay for anything healthcare related, including health insurance co-pays and even non-prescription medications.
Health Savings Account participants have a maximum contribution amount that they can make each year into their accounts. However, these contributions are completely tax-deductible. They can be opened through an employer who offers the Health Savings Account option or they can be opened by individuals independently of an employer program. If the Health Savings Account is opened through the employer, it may be possible for participants to have the employer deposit funds into the account pre-tax as well.
In order to establish a Health Savings Account, participants need to enroll in a high-deductible health insurance plan that comes with low monthly premiums. The funds from the Health Savings Account can cover any medical costs that are not covered by the high deductible health insurance plan.
In many cases, Health Savings Accounts can help to save participants thousands of dollars a year in health care costs. It is wise to speak with an experienced health insurance professional in order to learn more about Health Savings Accounts and to determine if Health Savings Accounts are the best option for you and your family. Contact us today for more information about Health Savings Accounts or to get started today.
Posted by Wiley Long at January 21, 2010 11:47 AM