The sad truth is that many Americans just don’t understand their healthcare plan. It’s not really their fault, to be honest; much of the insurance industry is needlessly complicated. However, if you don’t understand how your health plan works you could find out that your coverage is severely lacking just when you need it most.
That’s why in this article, we’re going to talk about one of the most powerful backup plans that you can have to fill in the gaps in a high-deductible insurance plan. It’s called the Health Savings Account, and it offers an easy way for the everyday person to save for their future health care and get a ton of benefits for doing so.
What is a health savings account?
A health savings account is exactly what its name implies. It’s a savings account that can be used to pay for costs which impact your health. While you could, of course, use a normal savings account to save for emergencies, the health savings account provides some stellar benefits that you can’t get anywhere else.
What’s the catch you might ask? You can only use your HSA funds for qualified medical purposes. That, however, can include many different things like prescription drugs, doctor’s visits, tests, and even travel or lodging if you need to travel to see a specialist.
What are the benefits of having a health savings account?
The biggest benefit of the Health Savings Account is that it gives you enormous tax savings that you just won’t get by stashing money away into a regular savings account. In fact, if you’ve been searching for ways to lower your taxable income, this is an excellent way to do so.
Any funds which you contribute to your HSA are pre-tax, and if you have a health savings account which earns interest or dividends, you won’t have to pay a penny on those gains either! Similarly, when you spend your HSA funds on qualified care, those distributions do not incur any taxes either.
An HSA offers you one of the easiest ways to pay for your out of pocket health care. It’s extremely useful for taking care of whatever your insurance doesn’t cover, and it gives you a nice a tax break for doing so.
These benefits alone make the HSA account an incredibly attractive way to save for medical emergencies, but an HSA has even more benefits than that if you dig a bit deeper. Using an HSA to pay for health care is refreshingly simple, and it covers almost anything related to your health.
An HSA works just like a regular savings account, and many providers will even give you a debit card for it so you can easily pay for qualified expenses. That means that you can use your HSA to pay for whatever care doesn’t fall within the range of your deductible or in network coverage.
With many employers opting for high-deductible plans, this can be a real lifesaver. Unlike an insurance plan which is tied to an employer, the HSA is an asset. It’s yours to keep no matter where you go, and the funds do not expire. It continues to grow in value when you don’t use it, and you’ll likely be glad those funds are there when disaster strikes.
Health savings account funds are also very flexible, and you can use them to pay for the qualified medical expenses of your spouse or dependents as well, even if they aren’t part of your health plan.
What can you pay for with HSA funds?
Most anything that you’d need that is health related is covered by your HSA. Here are a few examples of what you can get. If your current insurance plan doesn’t include vision or dental, then you might notice that an HSA is an attractive way to save for those things.
- Doctor’s appointments
- Prescription medications
- Tests like MRIs and bloodwork
- Dental care
- Home health care
- Chiropractic and massage
- Addiction treatments
- Fertility treatments like IVF
- Birth control
- Medical equipment
- Eye tests, contacts, and glasses
- Travel and lodging for out of area care
What Doesn’t An HSA Cover?
Your HSA won’t cover cosmetic procedures, OTC medications for which you don’t have a prescription, or anything else deemed not medically necessary. You also can’t use your HSA to fund a luxury vacation under the guise of getting medical treatment; lodging and travel expenses must be “reasonable” if you travel for care.
How can I learn more about how an HSA works?
Hopefully we’ve piqued your interest, because an HSA is one of the best things you can do for your financial future. If you’d like to learn more about health savings accounts and how you can get one started then have a look at this much more comprehensive health savings account guide.