Health Savings Accounts Are They The Future?
Health Savings Accounts (HSAs) were first offered several years ago as alternatives to traditional health care plans. The number of accounts opened by employees between 2005 and 2006 more than doubled. Perhaps they are so popular because they work similar to IRAs, 401Ks and other investment plans where pre-tax dollars are set aside. The funds can be used for deductibles, prescription drugs, and other medical expenses employees may incur throughout the year not covered by their regular health insurance. However, unlike investment accounts that are taxed upon withdrawing money, HSA funds can be freely withdrawn to pay medical expenses completely tax free.
For an employee to qualify for an HSA, he or she is required to first be covered by a high-deductible plan with a maximum out-of-pocket amount for expenses per year ($5,500 for individuals, $11,000 for families). HSAs are also advantageous for employers too, saving them thousands of dollars on constantly rising premiums. One company saved $113,000 one year by offering their employees an HSA option.
Perhaps the best reason to get an HSA has to do with how the deductible works (maximum out-of-pocket medical expenses). Once you reach it, whatever other medical expenses you incur are 100% covered. One case involves a woman who reached her deductible ($3000) while going through a high-risk pregnancy early in the year. By spring, the family wasn’t paying for prescriptions at the pharmacy, her older son’s emergency room visit was free of charge, she had her baby at no charge in August, and they paid for no other prescriptions or medical care for the remainder of the year. Having an HSA saved this family over $3000 in medical expenses during 2007. Its many advantages make offering an HSA the most economical option for both employees and employers.
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