The Importance Of Health Savings Accounts

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Health Savings Accounts Formerly known as Medical Savings Accounts, President Bush changed the name to Health Savings Accounts, or HSA. In 2003, congress approved a bill for Health Savings accounts and was signed into law in January 2004. This creation of HSAs is part of the largest expansion of the government intervening in medicine in 40 years (Americans for Free Choice in Medicine, 2013). Unlike the aforementioned health spending and reimbursement accounts, HSAs can be used for medical expenses for the employee as well as their spouse and dependents. Both the employer and/or employee can open a health saving account and the employer, employee or any third party can make contributions. As of 2013, the annual contribution limits for individuals is $3,250 for individuals and $6,450 for families (U.S. Department of the Treasury, 2013). HSA contributions are tax exempt and are used to pay for medical expenses to include, visits with the physician, hospital expenses, laboratory, radiologic and diagnostic services, prescription drugs, dental care, vision and hearing aides (Americans for Free Choice in Medicine, 2013). In contrast to FSAs and HRAs, unused funds from HRAs do roll over to the next year, funds are transferable if the employee changes jobs, and switches health care plans or retires. HRA funds can also be used for retirement income and members over age 65 are not penalized for withdrawing funds unless the funds are not used for qualifying expenses, which will result in withdrawals being taxed as income. All qualifying withdrawals are tax exempt and health savings account can accrue interest as well as invest in investment funds of which any financial gain is also tax exempt. With HSAs, health insurance premiums are r... ... middle of paper ... ... to withdraw funds from their health savings accounts for disqualifying medical expenses. Recommendations for those considering a Consumer-Driven Health Care Plan For those considering a consumer-driven health care plan, I would recommend that they be active in the management of their own health care in order to remain healthy so that they can prevent chronic conditions that require significant medical services. I would also recommend that for those considering a CDHP, they have the income potential earnings to save money each month either through a health spending and reimbursement plan such as the HSA, FSA or HRA or a regular savings account to have available to cover the cost of the deductibles, co-pays and co-insurances. If the deductible must be paid in full up front, I would recommend that the consumer set up a payment plan with a financial counselor.
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