Signing up for a Health Savings Account is relatively easy, as they are offered from banks, insurance companies and credit unions across the country. In order to have an HSA, consumers must also sign up for a high deductible health plan (HDHP), which complements the HSA by allowing members to divert catastrophic coverage to the HDHP. In fact, the HSA is usually intended to be used for preventive services, rather than illness or accidental coverage. It will cover routine dental and vision care. The HDHP that is chosen can be an indemnity plan, a PPO or an HMO. It is this high deductible plan that pays for hospitalization.
Members may contribute up to the amount of their HDHP deductible into their HSA yearly. For example, a member who has a HDHP plan with a $2,000 deductible can contribute $2,000 to their HSA to pay for medical care. The exception is a very high deductible plan; in this case, individuals can contribute a maximum of $2,700, and families can add as much as $5,450 to their HSA. The amount that remains at the end of each year is rolled over to the next year, so members can do well to contribute as much as they are financially able to contribute. And because an HSA is associated with a savings account, changing employers will not affect a consumer's access to health care.
Families especially benefit from an HSA, because they can take charge of their own medical costs, saving money as necessary to pay for each member's needs. With the high deductible plan family members have to spread the cost throughout the household, as well. Since these deductibles are often lower than other plans, however, there is never a need to extend finances.
One drawback is that an HSA can only be used for medical care. As such, what is withdrawn from an HSA account for reasons other than to make medical payments is subject to a 10% tax penalty, which is similar to what happens with an IRA. But for members who don't plan to use the HSA for anything other than their medical costs, the plan is relatively flawless.
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