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Health Savings Accounts

January 6th, 2010

I was just reading about a new thing called Health Savings Accounts.  What these accounts do is allow a self-employed person or someone working for a smaller employer to have less expensive health coverage.


These Health Savings Accounts (also called Archer MSA’s) have two facets.  The first thing needed is a high deductible health insurance policy.  The second need is to open a HSA (which is tax sheltered just like an IRA.)  An HSA can be funded by individuals to the tune of up to $3,050 and up to $6,150 for families. 


The HSA contributions are “pre-tax”, meaning they are deducted from one’s gross wages before computing taxes – just like an IRA.  Also like an IRA, the account earnings are not taxed.  When withdrawals are made the amounts are not taxed if used for qualified medical expenses. 


The experience of some HSA families has been savings of around $3,100 per year.  This savings is due to the higher deductible amount being assumed by the insured.  A nice bonus is that the annual savings goes a long way in covering the plan contributions needed to keep the account “topped up” to the maximum limit mentioned above.


The people who benefit the most from HSA plans are individuals and families that enjoy generally good health.  Now they can better afford coverage against catastrophic health problems without suffering under the burden of high cost, low deductible health plans.  One problem in switching to a high deductible plan is it may not be possible for those with preexisting conditions such as cancer or diabetes.


While the HSA’s have been criticized for taking healthy people out of the health insurance pool, those enjoying good health are now rewarded for their stay-healthy live styles.

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