An HSA, or Health Savings Account, is an alternative to
traditional health insurance coverage. With most Americans
seeking affordable health insurance, Health Savings Accounts
are being touted as an excellent option for those who want more
control over their health care expenses.
Those interested in establishing Health Savings Accounts have a
number of issues to address, the first being eligibility. In
order to set up such an account, one must also purchase a High
Deductible Health Plan, or HDHP. High Deductible Health Plans
are often referred to as catastrophic plans. While the insurance
premiums are low, as opposed to comprehensive health plans, high
deductible plans will not usually pay for the first several
thousand dollars of health care expenses. Before considering a
Health Savings Account, you should determine whether or not you
can afford the High Deductible Health Plan. If you decide to get
an HDHP, the amount of your deductible is extremely important
because it will determine the amount of money you are permitted
to deposit in your HSA. For example, if your HDHP deductible is
$1,000, you will not be able to contribute more than $1,000 to
your Health Savings Account in a given year. As of 2006, the
minimum deductible of your High Deductible Health Plan must be
$1,050 for individual coverage, and $2,100 for family coverage.
Seniors enrolled in Medicare are not eligible for Health Savings
Accounts. If you are a Veteran, and have received any health
benefits from the Veterans Administration within the past three
months, you are not eligible for an HSA. If you are an active-
duty member of the military, and have Tricare coverage, you are
not eligible to establish an HSA. If your spouse has a Flexible
Spending Arrangement (FSA) or a Health Reimbursement Account
(HRA), you cannot set up a Health Savings Account if your
spouse’s plan can pay for any of your health care expenses before
your High Deductible Health Plan deductible is met. You and your
spouse cannot establish a joint HSA. You cannot set up an HSA on
behalf of your child. If you have any health insurance, other
than the required High Deductible Health Plan, you are not
eligible to establish a Health Savings Account.
Even if none of the eligibility restrictions apply to you, there
are additional issues to consider before deciding to establish a
Health Savings Account. Managing an HSA is not an easy task.
You, the consumer, are totally responsible for the management of
your account. Should you spend all of the money in your savings
account, you will be responsible for providing all necessary
receipts and paperwork to your insurance provider in order to
prove that you have met your deductible. Additionally, the
consumer is responsible for researching and deciding on quality
health care services. Because Health Savings Accounts are
consumer-driven, it is up to the individual to decide which
medical expenses are necessary. On the surface, this sounds like
a good thing. We all want maximum control over our health care
spending. The drawback is that you may choose a superficial test
($500) over a more advanced test ($1,000) to save money. As a
result, you may sacrifice your health to save your money. With
comprehensive, or traditional, health insurance coverage, you
would not generally have to face such a decision.
Supporters of Health Savings Accounts have concentrated on a few
key advantages. The most frequently cited advantage is that HSAs
are tax-free. This is true; Health Savings Accounts are tax-free
when used for qualified medical expenses. Which products and
services are considered qualified medical expenses? That is the
sole responsibility of the consumer to determine.
Senate Republicans have used the increasing number of Americans
establishing Health Savings Accounts as an argument for their
legitimacy. While over one million Americans are currently
receiving health care through HSA-eligible health insurance
plans, this does not speak to whether such plans are a good
choice. While many Americans are enrolled in plans that are
compatible with Health Savings Accounts, supporters of such plans
do not offer any information regarding the level of satisfaction
experienced by HSA users.
If you are considering a Health Savings Account, it is extremely
important that you thoroughly research your options in the
interest of making an informed decision.
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