If you are like most Americans, you have access to medical insurance through your benefits package at work. During your company’s open enrollment period this year, you might have noticed a new option for health coverage – a Health Savings Account, or HSA. This option is part of an insurance trend towards consumer directed health plans as a means of controlling health care costs for an individual or family as well as offering more flexibility and choice in medical service providers. This article will provide a brief overview of what an HSA is and how it is a means to achieve the objectives of lower health care costs and freedom of choice in doctors and hospitals.
An HSA is a tax-advantaged savings account where the individual that owns it accumulates a fund for paying directly for medical expenses. An HSA offered through an employer’s benefit package will allow direct deposits into the HSA from an employee’s paycheck. The money that is deposited into an HSA is not subject to federal or most state taxes. Money can be withdrawn at any time to pay for qualified medical expenses, again without tax or penalty.
To qualify for an HSA, a person has to be covered by a high deductible health insurance plan. The idea is that a person will pay directly for routine and minor medical expenses that fall within the deductible limit using funds from the HSA. The high deductible health insurance provides indemnity health coverage for major medical expenses once the deductible is met.
An HSA is meant to put a patient in the role of a consumer when selecting medical service providers. Because payment is being made directly in cash, it is thought that a patient might have more negotiating power with a doctor or hospital to receive a discount in the fees charged. Because the person is paying directly for health care, he or she has complete freedom of choice in the doctors or hospitals used.
In summary, an HSA is a newer option in health coverage. However, whether it is better or not depends upon whether it is better for the individual or family considering this as the means to access and pay for health care.