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Health Insurance Savings Account
Health Savings Accounts: An Alternative to Traditional Health Insurance?
By Lisa Ip
Copyright 2006 Lisa Ip
If you've been following the news lately, you've probably heard
about the contentious issue of Health Savings Accounts, introduced
by the Bush administration in 2003 through the Medicare
Modernization Act. At that time the concept generated little buzz -
only recently has the debate heated up between critics and
supporters of the initiative.
A Health Savings Account offers people a second choice when it
comes to signing up for health insurance. It's not a replacement for
health insurance, but instead, combines aspects of personal savings
with the complete coverage offered by a health insurance plan. Many
defenders of HSAs believe it offers the best of both worlds so that
patients can have more control over their own healthcare needs and
save money in the process.
But what exactly does a Health Savings Account entail? Basically,
a Health Savings Account is a savings account (set aside for the
purpose of paying future medical costs) in conjunction with a
high-deductible health insurance policy. If your employer or
insurance company offers HSAs, you are given the option to deposit
money into the savings account, up to a set amount. The deposit
remains tax-free, even when you withdraw, and gains interest over
time - just like a traditional savings account. The difference, of
course, is that the money must be used to cover medical expenses you
incur up to the deductible amount. So if you need to buy
prescription eyeglasses, visit the doctor, or take an eye exam, you
would withdraw funds from the HSA in order to pay those bills. HSAs
can be used to pay for a wide range of healthcare expenses, not
traditionally covered by health insurance.
The good news is that once you reach the deductible amount, your
insurance coverage kicks in and you can use that to pay any
additional medical bills you are responsible for during the rest of
the year. Another positive aspect of a Health Savings Account is the
fact that with a high-deductible insurance plan comes low monthly
premiums. If you have little to no healthcare costs during the year,
you will save a lot of money on premiums alone. At the same time,
your savings account will gain interest and roll over to the next
year. After several years, even if you need to make withdrawals to
pay for certain medical expenses, you should have a significant
amount of money set aside for a rainy day.
In addition, once you turn 65, you can withdraw any leftover
funds to use for your retirement - and the balance remains tax-free.
You can use the money for medical expenses, of course, or for any
other expenses you have during your retirement years.
Opponents of HSAs argue that only the healthy and wealthy can
afford to take advantage of the opportunities Health Savings
Accounts offer to the public, while proponents of the plan believe
this type of health insurance has the potential to give the average
person more power to make informed healthcare choices. Only time
will tell whether or not Health Savings Accounts have the potential
to revolutionize healthcare in America.
About the Author
Lisa Ip is president of Uniforce Insurance, which she founded in
1994, in Madison Heights, Michigan. For more information regarding
health insurance in Michigan, visit
http://www.uniforceinsurance.com or call 888-302-RATE
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