Health Insurance: 3 Reasons You Should Pick the HSA Option

March 31, 2016 by in category Health Savings Account with 0 and 0

Buying health insurance has become more complicated in recent years, and deciding between plans can be a difficult and time-consuming process. Comparing coverage levels, required deductibles and copays is difficult enough, but choosing a health insurance plan also means making sure your preferred providers participate and that you will not be hit with huge out-of-pocket costs when you go to the doctor or incur a hospital stay.

The high cost of health insurance also has more and more consumers looking at so-called high-deductible health plans. As the name implies, high-deductible health plans come with higher than average deductible, often several thousand dollars. That may seem like a bad deal, but pairing such a plan with a health savings account, or HSA can make it a lot more attractive.

A health savings account allows you to put money aside on a tax-advantaged basis and use those funds to pay for out-of-pocket costs and other health care expenses. You can use your HSA to pay for copays on prescription drugs, deductibles and a host of other covered products and services. If you do not yet have an HSA, there are a number of reasons to consider one, including the reasons outlined below.

1. An HSA Can Help Pay for Unexpected Expenses

Perhaps the most important reason to have an HSA in place is that it can pay for unexpected costs associated with your health care. If you land in the hospital or experience a serious illness, you may incur high prescription drug costs, copayments and other unexpected expenses. Having the funds to pay for those expenses can mean the difference between a slight financial inconvenience and a full-scale financial catastrophe.

Unlike flexible spending accounts, which operate on the use-it-or-lose-it principle, the money you put away in a health savings account rolls over from year to year. If you stay healthy, the money stays in the account, and you can add to it as you see fit.

2. It Could Save You Money on Premiums

Choosing a health insurance plan with a low deductible might give you peace of mind, but it will probably come with a high monthly premium as well. High-deductible health plans have far lower monthly premiums, and that could mean lower costs for you.

You can take the premium savings you get from choosing a high-deductible health plan and use that money to fund your health savings account. That makes the combination of an HDHP and an HSAA a win-win.

3. You Could Reduce Your Taxable Income

If you have a qualified high-deductible health plan in place, the money you put into a health savings account could be tax deductible. For qualified individuals, the funds invested in an HSA can be deducted from total income, creating a lower tax base and lowering the amount you would otherwise owe to the IRS.

Health savings accounts are popular with self-employed individuals and small business owners, due in part to this tax saving benefit. The same factors that make the HSA an attractive option for the self-employed also make it a good deal for ordinary workers.

If your employer offers a health savings account, you might want to give this option a look. Health savings accounts are becoming increasingly popular, and their combination of premium reduction and tax savings makes the HSA an excellent choice for many workers.

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