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Can You Really Save with a Health Savings Account?

Oct 12, 2007
Before we talk about saving money in a Health Savings Account (HSA) let's talk about what an HSA really is all about.

HSA are tax preferred savings accounts for use to pay for qualified medical expenses. HSAs must accompany a qualified high deductible plan (QHDP) to be allowed. Individuals or business can participate in HSA offerings. Money put in to an HSA by an employer is not considered income to the employee. Employees who put money in to their HSA can deduct the contribution on their taxes.

There are many rules that surround HSA offerings and we are not going to delve into all the requirements needed to set up an HSA. This article will talk about the savings aspect of an HSA.

HSA owners can put in $2,850 for single coverage in 2007 and $5,650 for family coverage in 2007. These numbers rise in 2008 to $2,900 and $5,800 respectively. Therefore, HSA account holders can put in a size able amount of cash to help pay for expenses. If the health plan you have accompanying the HSA covers wellness services like childhood immunizations or mammograms, no money will come out of your HSA.

I have seen figures that around 85% of consumers spend less than $1,000 per year on health expenses. Drawing upon this figure, it stands to reason that many consumers would have a significant amount of money in their HSA each year if they are on the low end of health care spending.

Conversely, many Americans have serious illness, diseases, maintenance drugs or other ongoing medical needs that may drain the HSA account. So there is no way to conclude that HSA accounts will have money in the account each year. However, if there is money remaining at the end of a year, this money will grow tax deferred and never be taxed should the funds be used for qualified medical expenses.

So what can you do to preserve the account balance in your HSA? Take care of yourself. Stop smoking, lose weight, exercise and eat better. All of these things will contribute towards a healthier you which could translate in to a weight to keep more in your HSA. You may even participate in an HSA that rewards you for this things. These rewards programs give incentives to individuals to lose weight, exercise and other things that should help to reduce their risk so that big medical claims do not occur.

In conclusion, it is hard to predict if you really can save money in your HSA. If you have modest medical needs, you probably can save significantly. If you have ongoing medical needs with expensive treatment, you probably cannot save in your HSA but your underlying health plan will protect you from catastrophic expenses. We will explore more details about HSA requirements in a later articles.
About the Author
Scott is a partner in ESP Benefit Design, an employee benefits insurance firm based in Westerville, Ohio. (614-882-8535) Scott has an MBA from Franklin University. Scott has worked with over 6,000 customers. Email Scott at scott@espbd.com

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