Health Savings Accounts – An Affordable Health Insurance Option
Health Savings Accounts were created by the Medicare bill of 2003 to help people save money tax-free to pay for qualified medical and health expenses now and in the future. They’re similar in some ways to Flexible Savings Accounts offered to employees, but unlike those account, there is no “use-it-or-lose-it” risk. The money you put in a Health Savings Account insurance rolls over year after year accruing interest until you draw down funds for a qualified medical expense, which you can do at any time without incurring penalties or tax liabilities. And after retirement age, you can make withdrawals for any reason, like an IRA. As of 2009, an individual can contribute up to $3,000 tax-free in a Health Savings Account, while a family can contribute up to $5,950. There are no income limits. Anyone who meets the basic qualifications can open a Health Savings Account.
Health Savings Accounts aren’t insurance, per se. In fact to open an Health Savings Account, you must also be enrolled in a High Deductible Health Plan (HDHP) and not covered by Medicare or any other health insurance plan, although you can have dental, vision, disability and long-term care insurance along with your High Deductible Health Plan. You can also have disease- or illness-specific coverage and employer-provided wellness care, as long as they meet the federal government’s conditions.
Also known as Catastrophic health insurance, HDHPs provide affordable health insurance coverage for people who can’t afford other types of personal health insurance or whose employers don’t offer health insurance. Typically, HDHPs don’t pay for the first few thousand dollars (determined by the annual deductible you opt for) of medical expenses, but usually cover everything above that for the remainder of your plan year. But in theory, you have funds in your Health Savings Account to cover the high deductible, so you come out ahead.
A number of health insurance providers offer HDHPs and you can comparison shop High Deductible Health Plan quotes online. However, like all health insurance policies, you will have to go through an underwriting approval process, and certain pre-existing health conditions like cancer and heart disease may prevent you from getting coverage.
