Health Savings Account Fundamentals - How Does an HSA Lower Insurance Costs?

Another common misconception is that the HSA itself will lower your health insurance costs.

Moving to a high deductible health plan that is HSA compatible will generally lower health insurance premiums usually anywhere from 30 to 50%. Interestingly, most of the time the high deductible plan (HDHP) will save enough premium dollars to cover the increased exposure. In fact, it is rare when a high deductible health plan does not offer less out-of-pocket cost overall (premium expenses plus out-of-pocket risk).

The Health Savings Account simply allows for the saving of tax-deferred dollars for future health care expenses, which may or may not occur. In other words, the risk of having the increased deductible can be eliminated by funding the HSA.

Money is saved by switching to a high-deductible health plan. Benefits are restored by funding the HSA.

Often using the same amount of money previously being spent on health insurance premiums, one can achieve the following benefits by switching to a High Deductible Health Plan that is HSA compatible:

• 30 - 50% reduction in premiums
• Out of pocket risk paid from tax-free savings
• Long term saving for health care
• Tax deferred savings for anything you want after age 65

What happens to unused funds each year in your HSA?The money grows tax free and at the age of 65, unused HSA funds may be drawn from as retirement income.

How do you contribute and withdraw money from your Health Savings Account?

Depending on the administrator, bank or trustee of your HSA account, you can generally make contributions in the following ways:

• Mail in deposit checks directly to the administrator/bank.
• Set up a direct deposit arrangement
• From a paycheck withdrawal or directly from an employer

Withdrawals can be made in several different ways:

• Request a reimbursement check by mail from the account administrator
• Use a debit card (if available) to pay for expenses from the account
• The health insurance carrier can automatically pay for expenses from the HSA.

Does money need to be in the account in order for an expense to be eligible for reimbursement from the HSA?

No, as long as someone is covered by a a qualified plan and has their health savings account in place, they may be reimbursed from the account at any time in the future for a qualified expense.It is recommended that accurate records are kept and receipts are saved for any expenses pay for tax-free out of the health savings account.

Marc Hart, - Owner of Marc Hart Insurance Services in Glendora, CA specializes in High Deductible Health Plans. To learn more and to get Marc's Free Newsletter, please visit http://hsainsurancepros.com You may also contact Marc directly at hart4insurance@gmail.com

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