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Health Savings Accounts

Posted in Uncategorized | August 27th, 2011

Can anyone here explain to me about health savings accounts and how they work?

I was reading about health insurance plans and how they work and I discovered something called a health savings account that insurance companies have. Do the health insurance contribute money to the plan or I can go to any bank an open an account with $100 in it?

A Health Savings Account is an investment type account that is needed by people with insurance plans with very high deductibles. It works like this: You get a high deductible plan (say $2500) from your employer. You are responsible for the deductible, before the policy will pay anything. So, if you are married, you might need as much as $5000 for medical expenses. You set up an account and have money payroll deducted into the account. If you need money for medical expenses, you would draw from this account to pay the bills. The money you deposit is not taxed, similar to an IRA or 401K. If you don’t need the money, you can keep it there until you do, years down the road. You invest the money similar to an IRA or mutual fund. The policy premiums for your health insurance are low because you probably won’t need it. If you do use all of your deductible money, then the health insurance kicks in, usually for 100% of the next increment (depends on the policy, possibly another $2500) then, after that first $5000, if you still have medical expenses, ususally the policy pays at least 80% and you pay the remaining 20%, but there will still be a limit as to how much you would have to pay. Check with your Human Resources department for the particulars on your plan. See how much you have to pay out of pocket and what your premiums are, versus what a regular plan would be. Are you normally healthy? Maybe you go to the doctor once per year for about $150. If so, this might be a good plan for you.