Health Savings Accounts Offer A Variety Of Health Care Solutions

If you've just lost your group health coverage through work, just got notice that your health insurance premiums are going up again, or just wish you had some control over your health care, a health savings account (an HSA) may be just what you need. An HSA offers independence from employer-based coverage, options to keep premiums low and gives you more choice in how you manage your health care expenses.

HSA Plans combine high-deductible health insurance policies with tax-advantaged savings accounts. While you're in relatively good health, high-deductible plans may fulfill all your coverage needs because plans purchased after March 2010 cover regular preventive services even before you've met the deductible. For example, flu shots, a yearly checkup, and looking for dangerous conditions like certain cancers, diabetes, high blood pressure, etc., are all covered even though plans with high deductibles cost less than full-coverage policies.

If you do need to pay for services that aren't covered, some (but not all) high-deductible health insurance plans work with an HSA. These accounts allow you to earn interest tax-free and withdraw money to pay for qualified health care tax-free. While certain health-related expenses like aspirin, cough syrup or other over-the-counter medicines are not eligible to be paid for through an HSA, lots of other health-related costs are covered.

Health Savings Accounts Can Expand Your Choice Of Health Care

You can use your HSA funds to pay for acupuncture, aromatherapy, Ayurvedic Medicine, chiropractor services, Christian Science Practitioners, dental care, homeopathy, hydrotherapy, medical massage, nutritional counseling, or Traditional Chinese Medicine. You can even pay for qualified long-term care insurance via your HSA.

The National Institutes of Health recently recognized the benefits of what has been referred to an "alternative" health care in this country. With increasing demand, more health providers are offering these services in efforts to treat people more holistically. If you find your health insurance policy limits your choice of treatment, an HSA will allow you to take tax deductions for these expenses and earn interest tax-free to help you grow your savings quickly.

Health Savings Accounts Are Independent Of Employment

Unlike a flexible spending account that your employer may take back at the end of the year, an HSA is yours to keep whether you remain with your current employer or not. The balance in your account rolls over every year and continues to grow with interest without being taxed. If you withdraw funds for eligible health care expenses, the money is still not taxed even though you can also get a tax deduction for the expense without itemizing deductions.

Although you own your HSA, both you and your employer may contribute to your HSA Plan. In fact, contributions can be from other people, such a parent helping a child who is working a job that doesn't provide health coverage. Contributions from anyone other than your employer are tax deductible. Contributions from your employer may be excluded from your gross income.

Even after you retire, you may continue to withdraw funds from your HSA for eligible health-related expenses tax-free, but you can also spend the money for anything you want and just pay taxes on the withdrawal like you would with an individual retirement account (IRA).

HSA Plans Maximize Your Savings On Health Care

No matter how many years you take advantage of the benefits of an HSA, your high-deductible health insurance plan will probably cost you less in premiums than typical plans with low deductibles. As long as you have a plan issued after March 2010, you'll have coverage for preventive services without any co-payments or having to meet a deductible.

If you prefer an alternative form of health care not covered under your policy, you can still earn tax-free interest to pay for the services and lower your taxes with a deduction for the cost even without itemizing deductions.

Add up all you save with low premiums, lower taxes and higher savings account earnings year after year and see what you can save. Just like with standard IRAs, an HSA gives you the powerful growth factor of tax-free compounding.