Dynamite Health Savings Accounts

Many people don’t truly realize how valuable a Health Savings Account will be personally and for their families.

Health Savings Accounts (HSAs) were launched in 2003, and despite the fact they have been around for close to six years, people don’t seem to understand how they operate.

The idea sprang from the Medicare Prescription Drug, Improvement and Modernization Act. It was designed for U.S. citizens under the age of 65 to save for medical and retiree health expenses in a manner that gave them the tax advantages. Good start to a great plan.

The other bonus tucked away here is savings on premiums and reduced taxes. What more could you ask for? And, the premiums for HSAs are much lower when you compare them to co-pay and low deductible insurance plans.

Health Savings Accounts benefits are: your deposits and earnings aren’t taxed and you don’t have to use it all right away or wind up losing it. Money you have saved in your account is not taxed, and provided you use it towards health expenses that qualify, it is tax-free. That’s a pretty decent advantage that can add up.

Here’s something else to consider. HSAs are portable. Leaving one company to move to another is no longer an issue, as the Health Savings Account tags along behind you. And if you have coverage with a HDHP (high deductible health plan) with no other first dollar coverage, nothing can stop you from setting up a Health Savings Account.

Health Savings Accounts might just suit your budget too, as they offer terrific flexibility. You may contribute to them three ways. The first way is an individual or a family makes tax-deductible contributions to the plan. There’s no need to keep itemized lists of deductions.

The second way to contribute is your employer making non-taxable contributions directly to you, or employers who have a cafeteria plan may allow employees to have a salary reduction so they can contribute that money towards a Health Savings Account. The choices are nice and make life a lot easier health insurance wise.

If are 55 or older, go ahead and make extra contributions with no problems. Note: if you enroll in Medicare, you are not qualified to add funds to your account. This is similar to an IRA. Those funds in the account grow tax-free based on investment earnings.

The money in your health savings account stays there year round, every year. You don’t lose it because it is a savings account and the funds in it aren’t taxed, just so long as you use them to pay for qualified medical expenses.

The best route to go is to opt first for a HDHP and then supplement it with a health savings account. Find out if this coverage is for you by talking to an insurance broker who can answer your questions.

Randy Gillespie is with Illinois health insurance agency, Focus Insurance Group. To learn more about Illinois Medicare, health insurance, group health insurance or to get an Illinois health insurance quote, visit Focusinsgroup.com.

Tags: Illinois group health insurance, Illinois health insurance, Illinois health insurance quotes

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