A health savings account or HSA is also called a medical savings account or
an MSA and is one of the many versions of health care insurance available.
Benefits of a Health Savings Account
The first benefit of a health or medical savings accounts is that they
provide their policy holders with the opportunity to control how their health
care dollars are spent. The second benefit is its unique quality of being a tax
advantaged savings account as well as a comprehensive medical insurance plan.
How Does a Health Savings Account Work?
HSAs are much like IRAs in that they combine high deductible health
insurance with a tax advantaged savings account. The money that an owner
invests in his or her HSA account covers the cost of the deductible. Most accounts
limit the policy holder’s contributions into the tax deferred account to the
amount of the deductible. This money is held in wait for medical expenses which
qualify under the tenets of the insurance plan.
How Does a Health Savings Account Save Tax Money?
The highlight of an HSA is that the policy holder pays for the deductible
with pre-tax dollars. This means that a policy holder saves the money that
would otherwise have gone to pay taxes, effectually decreasing the cost of the
deductible. This creates a money saving advantage for an expenditure that is
usually a burden. Despite the fact that the deductible is high, the extra
amount pays for itself.
Who Should Invest in a Health Savings Account?
When the policy holder has paid off the deductible, the insurance provider
covers the rest of the costs incurred through health care expenses. The money
in the savings account earns interest and is owned by the policy holder who
holds the account. HSAs allow members to save approximately 70% or more on the cost
of their health insurance.
Because the deductible is higher than most other health insurance plans,
this plan is for those who can cover the initial high cost. This is an
excellent health insurance option for anyone interested in diversifying how
they save money.