Skip to content

Insurance Primer

Insurance Explained as Simple as Possible

  • Auto
    • When You Have an Auto Accident
    • Shopping for Car Insurance
    • Legal Minimums
    • How Much Car Insurance Do I Need
    • Saving Money on Auto Insurance
    • Young Drivers
    • Assigned Risk Pool
    • Leased Vehicle
    • Rental Cars
  • Disability
    • Types of Disability Insurance
    • Long Term Care Insurance
    • Social Security Disability
    • Workers Compensation
    • Veterans Benefits
  • Health
    • What is Covered
    • Managed Care
    • Pre Certification
    • Consumer Driven Health Plans
    • Health Savings Accounts
    • Prescription Insurance
    • Medicare – Coverage for Older Americans
    • Medicare Prescription
    • Medicaid
    • Denied Claims
    • HIPAA
    • COBRA and ERISA
    • Formulary – An Insurance Companies List of Covered Drugs
    • Open Enrollment
    • Policies
    • Health Care Terms
  • Homeowner
    • Homeowners Insurance Coverage
    • Homeowners Insurance and Dogs
    • What Is Not Covered
    • Renters Insurance
    • Flood Insurance
  • Life
    • Types of Whole Life Insurance
    • Term Life Insurance
    • Life Insurance – How Much to Buy
    • Life Insurance Medical Exam
    • Life Insurance Salespeople
  • Affordable Care Act
    • Politics of ObamaCare
    • ObamaCare Features
    • Marketplace Benefits
    • Open Enrollment
    • Robber Barons of Healthcare
    • Individual Mandate
Search

Health Savings Accounts

July 26, 2015February 2, 2023The Insurance Guy

Health Savings Accounts – Health Spending Accounts

Insurance companies have blended high deductible health plans with savings accounts to create a category known as Consumer Driven Healthcare.  The idea is that, with the high deductible, you’ll be more careful as you are spending your own money and keep medical costs down.  Then, once you have reached your deductible, you can use your spending or saving account to pay for copays or coinsurance.

Federal tax laws allow some plans to set up accounts that allow you to pay for health costs with pretax money, meaning the contributions to the Savings Accounts or Spending Accounts are deducted from your paycheck before federal and Social Security taxes are withheld (sometimes state taxes too). These plans have some limits and requirements but are generally a good deal. Some common types are:

Flexible Spending Account (FSA): a pre-tax account where unspent balances may not be rolled over, other than for a limited grace period after each plan year.

Health Reimbursement Arrangement (HRA): an employer-funded pre-tax account where unspent balances may roll over from year to year. Typically offered in combination with high deductible plans.

Health Savings Account (HSA): a pre-tax savings account funded by employer or employee that may roll over from year to year and must be offered in combination with high deductible plans.

So if I go to the doctor for a boo-boo, and the bill is $100, and I haven’t met my deductible yet, and I have to pay the whole $100 myself:

  • It might take $140 or so before taxes to take home the $100 that I need to pay the doctor after the federal, state, and social security taxes are deducted.
  • Or it can take only $100 if I use a health savings account that lets me pay health bills with money before it is taxed.

Pros and Cons

Health Savings accounts let you save money from year to year and are generally a good idea if you are healthy or near retirement.  Unfortunately, predicting your health in the future isn’t an exact science.

On the downside, if you end up ending expensive care, then the high-deductible plans that are packaged with HSAs and HRAs might mean a lot of cash out of your pocket.

The money in your HSA/HRA account is yours to keep for as long as you want, but it needs to be spent on qualified medical expenses.  Withdrawal for nonmedical expenses will require you to pay income tax and a penalty on the funds.

Post navigation

PreviousPolicies
NextWhat is Covered
  • Auto Insurance
  • Disability Insurance
  • Health Insurance
  • Homeowner’s Insurance
  • Life Insurance
  • Affordable Care Act
Copyright © 2023 Insurance Primer | Elite Business by Firefly Themes
Scroll Up
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT

Terms and Conditions - Privacy Policy