health savings accountOne of the most underutilized tools in the insurance world is the modern Health Savings Account or HSA. A health savings account can be used to cover the health insurance deductible and any co-payments for medical services, prescriptions, or products. In addition, health savings account funds can be used to purchase over-the-counter drugs and longterm care insurance, and to pay health insurance premiums during any period of unemployment.

Coupled with low-cost, high-deductible Catastrophic insurance coverage, a HSA could be an attractive alternative for those who feel that a standard health policy is unaffordable.

HSA plans are designed to have a higher than normal deductible, and as a beneficial result, a much lower monthly premium to be paid. The deductibles are either for a single person (which can run up to $5,000) and family (up to $10,000) but when the deductibles are covered, the procedure expenses are paid 100%.

The money which a person saves on monthly premium is supposed to be invested in to the Health Savings Account, which can take the form of a separate bank account at most major banks, or an investment fund approved for HSA deposits typically paying more interest benefit.

A debit card is issued for the account chosen, and all prescriptions, medical procedures, dental, vision, and any other health related bill is paid from the account.

As long as the account is used properly for medical expenses, the money invested into the account is tax advantaged: Up to $2850 for singles, $5650 for families, and is arguably the thrilling part of having one.

In case of emergency a policyholder may not have had the time to save enough to cover deductibles and medications. In all cases, expenses before the “Catastrophic” coverage begins, is the patient’s legal responsibility. However, the catastrophic policy guarantees the large expenses of potentially ruinous accidents, injuries and illnesses.

The separate accident and critical care coverage off-sets major shocks, such as cancer, loss of limbs, and the expenses of extended care. This keeps the premiums and deductibles more affordable, and covers the large amounts of cash that may be needed immediately to pay for an emergency room, or other catastrophe.

The key to all of this for the self employed health insurance buyer is to work with a health agent who cares enough to dig in to the details of what ancillary policies would be best, covering everything from accidents and the top illnesses, to which discount program to use for dental and vision.

The HSA is one of the best weapons for the highest payers of health insurance, which are self employed individuals with no group plan to cover them. Take advantage of any of the top company plans, and choose your agent carefully. There are plenty of reliable health insurance companies out there. Find an agent that knows what ancillary tools to put in to perfect your HSA, and reap the premium and tax advantaged savings.

HSAs are similar to medical savings accounts (MSAs). However, MSA eligibility has been restricted to employees of small businesses and the self-employed. HSAs are open to everyone with a high deductible health insurance plan. The only limitation on the health insurance plan is that the annual deductible must be at least $1,000 for individual coverage and at least $2,000 for family coverage.

Contributions to Health Savings Accounts by an employer are not included in the individual’s taxable income. Contributions by an individual are tax deductible. Individuals, their employers, or both can contribute tax-deductible funds each year up to the amount of the policy’s annual deductible, subject to a cap of $2,600 for individuals and $5,150 for families. Individuals aged 55-64 can make additional contributions.

The interest and investment earnings generated by the health savings account are also not taxable while participating in the program. Amounts distributed are not taxable as long as they are used to pay for qualified medical expenses, such as prescription and over-the-counter drugs and long-term care services as well as the purchase of continued health care coverage for the unemployed individual (via COBRA).

HSAs are the ultimate in “portability”. An individual is not dependent on a particular employer to enjoy the advantages of having an HSA. Like an individual retirement account (IRA), the health savings account is owned by the individual, not the employer. If the individual changes jobs, the HSA goes with the him or her.

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