Why Choose an HSA?

By choosing a Health Savings Account (HSA), you can benefit from lower premiums, tax savings, and greater control over how you spend your healthcare dollars.

Contributions to an HSA are excluded from your federal income tax.  Then, once funds are in the HSA, they can grow tax-free.  Also, as long as funds are used for eligible medical expenses, they can be withdrawn from the account free from federal tax.  No other financial product provides this “triple tax advantage.”

To open an HSA, you must have a qualified High Deductible Health Plan (HDHP).  With many HDHPs, you do not have to meet your deductible before your health plan kicks in.  Often, HDHPs cover pre-deductible preventive services (such as pre-natal care, annual physicals, mammograms, etc.).

Also, HDHPs frequently have more comprehensive coverage (sometimes even for chronic illnesses) than traditional PPOs.  If you are interested in holistic medical treatments that might not be covered by your health plan, such as acupuncture or chiropractic treatment, you can use your HSA funds to cover these expenses in full.  They are considered “qualified medical expenses.”

Although HDHPs place more responsibility on you to shop around for the best price and quality of healthcare, HDHPs do have an annual out-of-pocket limit, which includes the deductible, co-pays, and co-insurance.  Different plan providers set different out-of-pocket limits, but regardless of which carrier issues your HDHP, the insurance company must pay for all covered medical expenses over the out-of-pocket limit.  For 2009, the federally mandated ceiling for out-of-pocket expenses is $5,800 for individual coverage and $11,600 for family coverage.  You may find that the premium dollars you save on your HDHP cover a significant amount of this potential exposure.