Poor, Misunderstood Health Savings Accounts
Health savings accounts offer a way for people with high-deductable health insurance plans to save up for medical expenses while earning returns and avoiding federal taxes. But few Americans understand how they work, according to a report from online insurance quote provider insuranceQuotes.com.
The report found that most Americans are confused about one or more aspects of HSAs. Among survey respondents, 52% incorrectly thought they could use HSAs to pay for over-the-counter medications. Fifty one percent thought they could use them to pay for health insurance premiums. (They can’t.)
Only 14% of the survey respondents knew that an HAS must be paired with a high-deductible health insurance plan. This is defined as at least $1,250 for an individual and at least $2,500 for a family.
If you have that high of a deductible, however, you should consider an HSA. The contributions you make to your HSA are exempt from federal taxes, and the account can be invested. This makes them function somewhat like IRAs, except that you can use the accumulated funds to defray the out-of-pocket cost of your plan’s deductable.
Think of HSAs as good way to “close the gap” between what’s covered – and what you have to cover – when paying for your health care. High deductable health insurance plans are more common than ever, and covering that gap is a reality that needs to be planned for before you’re staring at a big health care bill.
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