Should You Open A Health Savings Account?

Should You Open A Health Savings Account?

A health savings account is another option for consumers in a market where the continuing drive for better health care and more varied coverage options. This option is a creative way for individuals to attempt to save money on their medical expenses. What is a health savings account? A health savings account is a tax-free savings account similar to an individual retirement account (IRA). It is designed for the specific purpose of paying for unforeseen medical expenses.



These expenses are completely tax deductible if you are self-employed, and there are even deduction for those who are not. Cash from these accounts can be withdrawn by using a check or debit card. This new development gives individuals the ability to help pay for routine medical expenditures, or emergency medical bills, with money that is tax free.

Health savings accounts are not completely new ideas, but law changes over the past few years have made this an option that is now available to just about anybody, while before it was much more limited. This is the way that a health savings account works: Everyday medical expenses may be paid for by a low-cost, high deductible health insurance policy.



The amount that is not used to pay bills will accumulate and continue to collect interest in the savings account. This amount keeps growing in the account, year after year. If you are fortunate enough to live a long and healthy life, then the account can actually be used as a supplement to social security after retirement.

The principle idea to open a health savings account is to substitute a conventional health policy. These plans are more flexible and allow people to select their own doctors while still receiving some of the protection that comes from higher costing insurance plans. This type of plan is also good for individuals with good health, since the balance in the account continues to accrue interest.



If you go a long period of time without any minor medical expenses, then you end up even more secure since part of the money you pay goes into an account instead of having an insurance company collect all of it.

In this plan the individual is responsible for payment of every day medical expenses such as prescription drugs, physicals, or basic check ups, while the insurance covers you for most major medical problems such as operations, or car accidents. For some people this is a good trade off, while others might be made nervous.



If you are prone to illness or tend to have a lot of small medical bills through out the year, then a health savings account may not be the best option for you. However, if you tend to be healthy, but just want coverage for the "just in case" scenario, then having a health savings account can be an excellent way to provide protection for yourself.

Always do your homework, and do the math. Health savings accounts sound like great ideas, and for some people they are, but are they the right choice for you? Only some homework can determine that, but it is an option that shouldn't be pushed off the table too quickly, because it might be just the compromise you've been looking for.