Many companies are now offering their employees the option of putting money into a health savings account. This new, tax-free, feature of many health insurance package options might be a little confusing to understand at first, but the option is one worth exploring. This is especially so for anyone that has average to better than average health care expenses during the course of a year.
A health savings account is nothing more than an add on to traditional health insurance that enables people to put away money without tax penalty for qualified medical care expenses that might arise. Money put into the accounts is accessible for a number of things that normally are taxed. The fact is the person who puts the money into a health savings account owns that money and controls it, but to enjoy the tax-free benefits, the money does need to be spent on health-care related expenses.
A health savings account is a great option for families that know they’ll have a certain amount of medical-related expenses during the course of a year. For example, if there is an average of 20 doctor visits with a $10 co-pay each, $200 can be put away, tax-free, to cover the co-pays. Money saved in these accounts can also be used to pay for such things as over-the-counter medicines, eye care, dental and so on. There are literally thousands of things that fall into the “qualified expense” category. Medical supplies, too, such as bandages, creams and other products are generally considered covered expenses.
Many health savings account options offered through employers come with their own bank or debit cards, which give account owners 24 hour access to their money. These cards are generally accepted at doctor’s offices, hospitals and pharmacies. These cards should be used only for medical-related expenses, however, to ensure that all purchases made with them fall into the qualified health care expense category.
Some employers offer health savings account options that roll over from year to year, but other plans might actually involve a loss of money at the end of the year if it isn’t spent. To prevent losing money, it’s best to fully examine the options and carefully calculate how much money should be put away on an annual basis. Families with regularly occurring medical and prescription costs will generally find this process a little easier to contend with.
To figure out a minimum for a family to commit to a health savings account program, consider such things as average annual out of pocket expenses for co-pays, over-the-counter medicines, eye care, emergency room trips and so on. Go a little below the average if you are concerned about not needing to use every penny in an account that doesn’t roll over.
It’s a relatively new feature in the health care industry, but the truth is health savings account options can save people a lot of out of pocket expenses on medical care. Since the money is tax-free if it’s used on medical expenses, these accounts are good ideas for anyone that has a few thousand dollars in extra medical costs over and above what their insurance covers on an annual basis. Even those with a lower annual expense can benefit.