HSA Bank Accounts – The Basics

An HSA bank account, more commonly known as a health savings account, is used along with an HSA-compatible high deductible health plan. Used properly, it can be one of the best ways you can spend health insurance dollars.

How Can You Save Money with an HSA?

Most traditional health insurance plans can cost you literally thousands of dollars every year in premiums. If you are healthy, you won’t get a lot of benefit from paying for this type of plan, because the premiums are going to cost you more than what you would normally need to spend in health-related expenses. However, a high deductible health plan and an HSA bank account, used together, can be a great way to use higher deductibles to gain lower premiums. But often times, even after the trade off of facing those higher deductibles, overall expenses are usually lower if you have a healthy year. You will have to handle more out-of-pocket expenses up front, though, for the services you do use.

Remember What Insurance is Really For

If you have an accident, will you have the money is available to pay for it? What if you become sick and require extensive, costly medical care? The HSA bank account and the HSA-compatible health plan, used together, can help you avoid financial catastrophe if you face this type of situation, because once you’ve met your deductible, your insurance company will take over paying your medical bills. Therefore, if you’re healthy and generally just need regular doctor’s appointments and some prescription medications, that means you pay your bills. But if you really get sick, you won’t face tremendous financial risk because the insurance company will take care of any expenses beyond your deductible — and for many of us, isn’t that what insurance is really for? To protect us from the really catastrophic events?. What’s best about this is that if you are particularly healthy one year, and you don’t use the money in your HSA, it’ll simply be carried over into the next year, and it will remain tax-free as long as you only use it on qualified health expenses.

How to Set Up and Use an HSA

Once you enroll in an HSA-compatible high deductible health plan, you can set up an HSA bank account. Most major banks will let you do this, or you can choose to use the bank recommended by your health insurance plan. Once you set things up, you’ll usually get a debit card and checks just as you would if you were setting up a normal account. The difference is, of course, you only spend the money on qualifying medical expenses, many of which will count toward satisfying your health insurance deductible. If you do have health expenses that don’t qualify as part of your deductible, you can still use the money from the account with no worries.

Many people will find that they need dental work or eye care, but these are services that regular insurance policies usually don’t cover. However, you can use the monies from your HSA to cover them, all tax-free. Again, though, any unqualified expenses that can be covered by funds from your HSA will not go toward your detectable amount.

HSAs can seem complicated at first, but they can also be a great and very inexpensive way to control health care costs for many people willing to take the time to understand them.