Exploring the Health Savings Account; is it right for you?
The healthcare insurance marketplace, working with the federal
government, has recently begun to offer an alternative to
traditional health insurance. This new option, known as the
Health Savings Account, is designed to give consumers more
control and accountability for their health care spending and to
ease the burden on employers who have been struggling under the
continually increasing cost of healthcare.
The Health Savings Account (HSA) is a savings account that
accepts pre-tax dollars designated for healthcare expenditures
only. You are entitled to establish and use an HSA if you are
enrolled in a high deductible health plan (HDHP). An HDHP is a
health insurance plan where there is a high deductible (the
minimum deductible to qualify as an HDHP is $1,000 for
individuals; $2,000 for families in 2005). In general, these
HDHPs have significantly lower premiums, freeing money that can
be placed in the HSA for later use.
The theory behind the HSA/HDHP is several-fold. 1. If consumers
are aware of the cost of their healthcare, as they will be with
a high deductible, they will buy more prudently. Prudent
purchase means being able to keep money saved toward healthcare
costs in another year, or, eventually, drawing down the funds
and paying regular income tax on it, something like a 401(k)
plan.
2. Employers are relieved of the burden of high cost premiums
and can choose to place some or all of the savings into HSAs on
behalf of their employees.
3. HSA funds can be rolled over from year-to-year, allowing you
to build a medical nest egg.
The HSA option was signed into law in 2003 and made available in
2004. The major impetus for the HSA approach was the continued
rise in healthcare premiums. Premiums for employer-provided
health insurance have risen 59 percent since 2000, according to
the National Bureau of Economic Research. Employer health
insurance premiums increased by 11.2 percent in 2004, nearly
four times the rate of inflation, according to the National
Coalition on Health Care. Mellon Human Resources and Investor
Solutions in May conducted a study that showed 7 percent of the
over 360 employers surveyed already offer HSA plans to employees
and 32 percent plan to offer them in 2006.
These rapid changes have left many people wondering if they
should agree to an HSA option. The answer to that question rests
with an analysis of your individual situation. You must balance:
1.)the cost of your share of the premium; 2.)the savings that
you will roll into the HAS
with the likelihood of spending that money and/or more on
healthcare costs. If you are like more than 70% of Americans and
spend less than $500 out-of-pocket on healthcare annually, there
may be a substantial savings for you in the HSA. If, on the
other hand, you or your family use a lot of medical resources or
are at-risk for larger medical expenditures, or do not have cash
readily available for unexpected expenses, the HSA could be a
very difficult option.
About the author:
carcasherdotcom
seocontest is your place for car insurance and sales.
