DEXTROpay™

Health savings accounts (HSAs) are like personal savings accounts, but the money in them is used to pay for health care expenses. You — not your employer or insurance company — own and control the money in your health savings account. The money you deposit into the account is not taxed. To be eligible to open an HSA, you must have a type of health insurance called a high-deductible plan.

 

HSAs were created so that individuals covered by high-deductible health plans could receive tax-preferred treatment of money saved for medical expenses.  Generally, an adult who is covered by a high-deductible health plan (and has no other first-dollar coverage) may establish an HSA.

 

Like any health care option, HSAs have advantages and disadvantages. As you weigh your options, think about your budget and what health care you're likely to need in the next year.

If you're generally healthy and want to save for future health care expenses, an HSA may be an attractive choice. Or if you're near retirement, an HSA may make sense because the money in the HSA can be used to offset costs of medical care after retirement. On the other hand, if you think you might need expensive medical care in the next year and would find it hard to meet a high deductible, an HSA might not be your best option.

To qualify, you must be under age 65 and carry a high-deductible health insurance plan. If you have a spouse who uses your insurance as secondary coverage, he or she also must be enrolled in a high-deductible plan. As its name implies, it's a health insurance plan that has a high deductible — the amount of medical expenses you must pay each year before coverage kicks in. While the deductible is high with this type of plan, the premium (the regular fee you pay to obtain coverage) is typically lower for high-deductible plans than for traditional plans.High-deductible plans don't start paying until after you've spent at least $1,250 (for an individual) or $2,500 (for a family) of your own money on health care expenses.

 

You can use your HSA to pay deductible expenses, as well as copays and other noncovered health care expenses.Not all high-deductible plans work the same.

For instance, plans may pay for preventive services, such as mammograms, before the deductible is met. It's critical to carefully review the plan's coverage details, including the out-of-pocket maximum — the limit on how much you would have to pay out of pocket for medical expenses in a year.