How Do HSA's Work?

What Is An Health Savings Account (HSA)?

A Health Savings Account is a tax-advantaged bank or savings account combined with a low premium-high deductible insurance policy. A HSA provides a financial planning approach to managing the cost of healthcare.

You build a reserve to fund first dollar medical costs. If you and your family stay relatively healthy as most Americans do (73% have less than $500 in medical costs each year) the account grows and can eventually be used as a second retirement account.

Save Money By Reducing Health Insurance Premiums

By establishing a high deductible plan which protects against catastrophic loss, you can cut your premiums by as much as 40-50 percent over a traditional group or "doctor copay" plan.

Reduce Your Federal Income Taxes

Contributions to an HSA can be deducted from your federal taxable income. The amount that can be claimed for 2008 is up to $5800 for a family and $2900 for an individual. 

Contributions are not subject to withholding, estimated taxes or other employment taxes such as FICA.

You Will Earn Interest Tax Free

All interest, dividends, and capital gains earned in a Heatlh Savings Account are tax deferred and when used for qualified medical expenses are tax-free. And since any unused funds roll over to the next year, as your account grows, additional self-directed options such as mutual fund investments are available.

Grow Your Second Retirement Account

Money remaining in an HSA after age 65 can be used for anything (even non-medical expenses) and withdrawals are treated just like an IRA.

Money left in the account continues to accrue earnings on a tax-deferred basis. Prior to age 65 funds withdrawn for non-medical expenses are subject to a 10% penalty.

You Can Pay For Non-Traditional Medical Services

Pre-tax dollars can be used to pay for medical services not covered by traditional health plans.

Some examples are:

  • laser eye surgery,
  • dental, eyeglasses,
  • acupuncture,
  • kids' braces,
  • long term care premiums, and more.

For a more extensive list of covered items and additional information complete our online quote  form and contact Heathquotes at 1-800-345-0789.

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