What’s a Health Saving Account and why should I consider one?

Most business owners that have offered their employees High Deductible Health Insurance Plans also offer their employees “Health Saving Accounts”. Unfortunately, the majority of employees don’t utilize this potion of their health insurance plan. This has to do with a lack of information on what a “Health Savings Account” is and how it works.

A Health Savings Account is an account that allows you to save money to put toward future Medical Expenses. Think of it as saving for a rainy day to cover medical bills, and costly expenses (Braces, Laser Eye Vision etc). An employee or an employer can put aside money into an account which gives the employee a tax deduction and savings to put toward qualified medical expenses. The plan allows for money to be carried over year after year helping employees meet large expenses or cover routine exams etc.

What makes the plan so interesting is it can allow you to take a portion of what you would have normally paid in premium and save the difference. Almost giving yourself a “Bonus” for keeping yourself healthy.

Let me give you an example:

Option 1:
“Traditional” Individual Plan
Monthly Cost-$400.00
Total Cost- $400.00

Option 2:
“High Deductible Plan $2,500 Deductible w/ HSA account” Individual Plan
Monthly Cost-$200.00
Saving the difference $200.00 in an HSA account
Total Cost- $400.00

After a year the person with Option 2 has set aside $2400 (Not counting interest) and can now use that account to meet his medical expenses. If the situation arises that he had a quiet year medically, his account balance would carry over to the next year.

So in both situations, the monthly expense is the same $400.00 but with an HSA account you have the opportunity to have money set aside for future medical expenses.

Any time you can set aside money for your benefit, and get a tax deduction in the process, you should jump at the chance. Force yourself to save for the future and you’ll be better off in the long run.

If you have any questions you can always reach me at 631-338-9917.

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