The Health Savings Account (HSA)
An employee-sponsored health savings account (HSA) is a great way to save for medical expenses. It’s essentially a savings account that is linked to a health insurance plan that helps you cover high-deductible and uncovered medical expenses.
The cash-value HSA (Healthcare Savings Account) is the fastest growing health care coverage in the United States. This is due in large part to its flexibility, which enables consumers and employees to use the money they’ve invested tax-free and with full control over how they use it.
You can also quickly withdraw funds from your HSA to pay for medical expenses. Unlike a Flexible Spending Account (FSA), you don’t need to submit receipts for your expenses.
If you’re looking for a good way to save for your future medical expenses, you should strongly consider an employee-sponsored health savings account. It’s a good idea to consult with your employer’s benefits department to learn more about the health plan offered for your company, and decide if these savings accounts are the best answer to your concerns.
The Health Reimbursement Account (HRA)
An HRA is a medical expense reimbursement plan that allows you to set aside substantial amounts of money to make future medical expenses easier to manage. Under an HRA, you can set aside a certain amount per year from your paycheck for tax-free reimbursement of qualified medical expenses.
Wellness programs are popular ways for employers to entice employees to undergo health assessments and then reward them for taking positive steps, such as weight loss programs, healthy eating habits and stress reduction. But HRAs are a more flexible option for employers.
The money you set aside in an HRA plan is usually deducted from your tax-free salary each month. In a way, your HRA can be a bit like an individual health insurance plan.
The money in the HRA can be used to help contribute towards medical expenses you incur, but unlike an individual plan, you can’t use the money in your HRA to cover your monthly premiums. In addition, your employer’s contribution to your HRA may not count as part of the employer’s monthly contributions to your group health insurance plan.
The Flexible Spending Account (FSA)
A flexible spending account (FSA) is a tax-advantaged account created by the government to help workers with their healthcare expenses. You select your own healthcare plan and estimates total medical expenses for the year. You will use the tax-exempt money contributed to the FSA to pay for qualifying medical expenses during the year. You will report FSA contributions (or amount withdrawn from the FSA) and total qualifying medical expenses for use of FSA for the year on your tax return.
Medi-Share is a medical savings plan.
You can open a Medi-Share account online immediately if you’re referred by a friend. Otherwise, you’ll need a doctor to refer you. You’ll also need to pass a medical exam and other paperwork. While you can qualify for a Medi-Share membership after leaving a job, members on employer-sponsored plans may be able to keep their coverage (if they already have it). You’ll need to speak to your employer or your insurance company before you leave to find out if they will support a transition to Medi-Share.
If you leave a Medi-Share account, you’ll have 60 days to return to an active account. If you’re currently a member of a medical savings plan through your employer, you may be able to keep your coverage and transition into Medi-Share. You may also be able to create a Medical Cost Sharing Plan with your church to help people who would otherwise not be able to receive the care they need.
Choosing The Right HSA Account For You
Okay, so for your HSA account, instead of an investment account, you’ll choose among three options:
“ Managed care accounts. These accounts are designed to be very simple. They’re designed just like HSAs with low or no fees, but you can’t withdraw your money. Instead, the money in the account gets used to pay for your medical bills.
“ Health care mutual funds accounts. These accounts are designed to be attractive to experienced investors because most of the expense ratios are high. They have the same rules as conventional mutual funds, including the ability to be invested in outside assets.
“ Separate accounts. These accounts are owned by the health care plan, and you can put your money into whatever investment is best for you.
Another thing to consider is that you’ll probably be managed unless you’re an experienced investor. Although it’s possible to let your HSA trustee choose your investments, you’ll probably be better off choosing your own.
Best HSA Accounts
An HSA account is a great way for people to save for future health care expenses. A Health Savings Account (HSA) is a tax-exempt trust or custodial account that has been established to pay or reimburse you for qualified medical expenses you incur.
The account beneficiaries are twofold – you can use money left in your HSA when you die, or a joint owner of a HSA can use the money when you’re deceased. HSAs are said to be the most flexible plan type, and it’s ideal for consumers who are conscious about their health and want to pay for future medical expenses in a tax-friendly way.
That said, the tax benefits of having an HSA account come with some strings attached. The money in the account can only be used for eligible expenses and has to be spent within a certain period or else it’s lost.
The main beneficiaries of an HSA account are:
- Health-conscious individuals who don’t want to be stuck with high premium or deductible bills later on
- People who belong to a high-deductible health insurance plan because certain health care expenses that they might incur in the future might exceed the coverage amount
- Younger individuals who are reasonably healthy and have a lower risk of incurring high medical expenses in the future
What does want really matter? Does it matter what health savings plan your employer offers as long as you have health insurance? It does if you want to save money, avoid penalties and be healthy.
HSAs offer the potential to save you money, but only if you use them correctly. With a health savings account, you make your own health insurance decisions and manage your own health care spending.
The health savings account offers savers an opportunity to save money in a tax-advantaged account while receiving deductibles, copays and premiums on a tax-free basis.
The downside: if you don’t use the account to spend money on health care expenses, you lose all of the interest you’ve accumulated. And in the process, you also lose the tax advantages. This allows your money to grow and compound tax-free.
A health savings account will become a retirement saver if you spend money from it on things other than medical and dental expenses for you and your spouse. You won’t be taxed on the money you earn in the account, and you won’t owe taxes on the money when you withdraw. (However, you will likely be hit with a tax penalty if you take money out before you’re 59-1/2.)
Health Savings Accounts (HSA) are not only a growing trend; they’re also a lot of fun. HSA plans allow you to sock away money you’re not using for taxes and spend it on qualified medical expenses. Unlike other kinds of savings accounts, however, HSA allows you to use what’s in it when you need it.
<p style="font-weight:bold;">HSA is a tax-deductible, savings account.</p>
HSA funds are yours to keep and can even be inherited. <p style="font-weight:bold;">You can also invest money in an HSA just like with a regular savings account.</p>
Your HSA contributions can be invested just like any other qualified investment you have. This is a great source of tax-free investment income and can help provide retirement income once your savings are exhausted. <p style="font-weight:bold;">There are no income restrictions for using money in your HSA.</p>
However, there are many different types of HSA accounts. All of which can be used in different ways. So you’ll need to consider your unique situation when deciding on HSA option is best for you.
Health Savings Administrators
Before we get into the details of Health Savings Savings Administrators (HSA) plans, let’s make it clear that most health plans (both major medical and HMO) are similar in the following ways:
- You are generally required to carry health insurance;
- If you meet the plan’s eligibility requirements and you use your health care coverage, you will generally not pay any out of pocket fees; and
- In some cases, you may be asked to obtain a referral for certain services.
Because of these similarities, HMO and major medical plans (such as Kaiser and Aetna) are often typically considered to be the same, but in reality, they are very different.