Health savings accounts are authorized by Congress to allow special tax-advantages for both current and future health related expenses. Because of their similarities to IRA accounts, they are often referred to as “medical IRAs.” The account cannot be established independently–it must be accompanied by a special low cost, high deductible health insurance policy that must meet certain IRS guidelines.
By switching from traditional health plans to health savings accounts, most people realize significant savings, both in current insurance premium costs and taxes! When medical expenses arise in the future, those bills can be paid with tax-free money from the health savings account.
The accounts. Deposits into the accounts are 100% tax-deductible for the self-employed and most other taxpayers, even if deductions are not itemized. Funds deposited into the accounts are earmarked for future medical expenses. Interest (or earnings) accrues on the deposits on a tax-deferred basis, just like traditional IRAs, but unlike IRAs, withdrawals made for qualified medical expenses are actually TAX-FREE!
Typically, withdrawals for most routine medical expenses can be easily made by check or debit card (depending on the services offered by the financial instution you choose to handle your account). Importantly, what is not used from the accounts each year stays in the accounts and continues to grow on a tax-favored basis to supplement retirement … just like IRAs!
The smart way to fund health savings accounts is to contribute the maximum amount allowed by law each year. This allows you to reduce your taxes each year and grow the account to the largest extent possible utilizing the magic of compound interest on a tax-favored basis.
The required HSA-qualified health insurance policy. In order to enjoy the tax advantages of an HSA, the law mandates that a special high deductible health insurance policy (“HDHP”) be maintained in conjunction with the accounts. In a nutshell, the idea is to “self insure” the “small” bills–that is, pay medical expenses under the deductible amount from the savings accounts–and let the “high deductible” insurance policy pay the “big” bills that exceed the deductible. Importantly, not just any policy with a so-called high deductible will suffice; an HDHP must meet certain IRS requirements in order to qualify for the accounts. Thus, the vast majority of people must switch their current insurance policy to an HDHP to qualify. These policies are issued by private insurance companies.
The 2-fold savings effect. Most individuals and families should see significant savings by switching to health savings accounts. First, significant premium savings should be realized by opting to carry a lower cost “high deductible” HSA-qualified policy instead of a traditional high-cost health insurance policy. (A typical traditional health insurance policy is very expense due to a low deductible and various co-payments for services). Further, tax savings can be significant due to the tax-deductibility of all deposits made into health savings accounts. Indeed, in many cases, accounts can be fully funded each year with premiums saved by switching from a high-priced insurance policy to an HDHP!
What we do and how we can help you. Our nationwide insurance agency is one of the few true one-stop shopping sources for health savings accounts. In fact, we have specialized in marketing HSA-qualified insurance policies for over 6 years! In addition to representing several highly-rated insurance companies offering HSA-qualified policies, we also help our insurance clients establish their health savings accounts with the leading HSA administrator at discounted rates. In other words, we do it all for our clients–true one stop shopping for health savings accounts! (Please note: We do not market savings accounts for people who are not our insurance clients.)
If the basic concept behind health savings accounts seems to make sense for your situation, we invite you to learn more by clicking on the info links on the right hand side of the page–you won’t find better info on health savings accounts anywhere on the net! Then, if you would like a free, fast quote on the health insurance policy required for an HSA plan, just click on the blue “Get a Quote” bar at the top of this page or most of the internal pages in the site. The process is fast, friendly, and free!