What Is An Hsa Plan

A Health Savings Account (HSA) is a plan that enables you to put pre-tax dollars into an account to pay for health care costs and services.

HSA Plan Defined

An HSA Plan is a savings account, created through a health insurance company with pre-tax dollars which are set aside for medical costs. The money in an HSA plan can grow because it can be invested or simply remain in an interest-bearing account. The HSA plan was created to go along with a High Deductible Health Plan (HDHP).

Benefit of an HSA Plan

The first obvious benefit of the HSA plan is that the money put into the account is pre-tax, saving the plan holder tax dollars right off the bat and maximizing his earned income. Another clear benefit of the HSA plan is the ability that it has to grow, the savings account can gain simple interest or growth by investment. One of the greatest benefits of the HSA plan is that unused funds can roll over year after year.

Use of HSA Plan Funds

An HSA plan is set up for medical expenses. Withdrawing HSA funds for approved medical expenses allows the plan holder to pay for his medical expenses with untaxed income. Approved medical expenses include eyeglasses, prescription medicines, doctor visits, medical procedures and meeting deductibles to name a few.

HSA Plan Funds for Non-Medical Items

Withdrawing HSA plan funds for non-medical items is much like withdrawing money from an IRA too early. You will be penalized and taxed for withdrawing HSA plan money for non-medical items.

Negative Side to an HSA Plan

Some people believe that the HSA plan was designed for healthy people and is harmful to the health insurance industry as a whole because it takes the healthy people out of the pool. There is also some risk involved with an HSA plan as with any investment. While the hope is that the money in an HSA plan will grow, there is always the chance that investments will falter.

An HSA Plan

An HSA plan offers its policy holder the opportunity to save money for use toward his future health. HSA plan funds have the opportunity to grow, potentially saving the policy holder a great deal of money in the long run as well as allowing the policy holder to prepared for future health issues.

Tags: medical expenses, plan that, policy holder, future health, health insurance, healthy people