Health Savings Accounts: Paying for what you use

Everyone needs health insurance, now, more than ever. Today, even a simple procedure can cost thousands of dollars. The right coverage is essential to help protect you and your family. But at what price? Health insurance premiums have steadily escalated, leaving you to pay more.

But there is good news.

Federal legislation has authorized the Health Savings Account (HSA) that works with a Qualified High Deductible Plan (QHDP). An HSA is funded with tax-free dollars and lets you withdraw money to pay for qualified medical expenses, making healthcare more affordable.

For example, if you're in the 25 percent tax bracket and have deposited $2,000 in your HSA, you could save $500 in taxes. Your agent will help you with the QHDP. A bank helps you with your savings (HSA) account.

You pay for what you use

Many people with low deductible co-pay plans never reach their deductible. They may be paying for coverage they are not using since premiums on these plans are higher. A QHDP with an HSA works differently. Qualified medical expenses can be paid with HSA funds, tax free. Once the deductible is met, you are insured through your QHDP for covered expenses whether large or small. If you don't meet your deductible, the money in your HSA can gro "tax free" for future use.

Disadvantages

The downside for employers is that when they contribute their money to an employee's HSA, they have no control on how the employee spends it. If the employee spends the money for other than health related expenses, they are taxed on the money and penalized 10 percent. As long as they use the money for the IRS regulated health expenses, they are never taxed.

Another downside for the employee is that it requires more record keeping on their part for tax purposes.

Advantages

By far, the biggest advantages of an HSA are lower premiums and tax savings. Imagine paying for routine office visits, lab tests, eyeglasses, dental care, prescriptions, and much more with money that has never been taxed. With a QHDP, you will also save on premiums, sometimes as much as 50 percent over traditional low deductible co-pay plans. Once you meet your deductible, your QHDP can pay as much as 100 percent of covered expenses. Any money left in the account rolls over from year to year. Plus, an HSA is permanent, and stays with you, the account owner.

There are a number of local banks that will supply consumers with the savings accounts (HSA) to go along with the Qualified High Deductible Plan. A skilled agent can help you customize the co-insurance and deductible options of your plan and guide you to a banking relationship that fits your needs.

Laverna Witkop is a Life and Health Insurance Specialist at the Ford Insurance Agency. She's a member of the National Health Underwriters Association and sits on agent/company advisory councils. She can be reached at 941-0450 or lwitkop@fordinsurance.net.

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