What You Need To Know About Health Savings Plans

There are few things more boring than studying health insurance and the myriad of options that are offered to those who are qualified, but it is worth the time and effort to understand what the options are. You can start with Health Savings Accounts (HAS) that are savings accounts that can be used only for expenses related to health care. The money in those accounts are not taxed, but if you take money out of an HAS for non-medical needs, the money that is withdrawn is taxed with a 10 percent penalty to go along with the amount that is withdrawn, if the person who makes the withdrawal is under the age of 65. If that sounds like it is complicated, it gets even worse.

In 2003, health savings accounts were first created to fill an increasing need for consumer directed health care and controlled health care costs. Anyone who has a high deductible health insurance plan is eligible to open a health savings account. Theoretically, health care costs are controlled with an HSA because not only is the consumer more careful about how the money is spent, but doctors can choose to lower their own rates in order to compete for the consumer's business.

Younger and healthier people can easily benefit from the health savings plans. Those who need more expense health care may not be able to use the health savings plans because they do not have the time to save up the proper amount of money to make it work to their benefit. This is in direct contrast to the Flexible Spending Accounts since in an FSA, unused money does not roll over to the next calendar year.

If you own a health care account you can decide how much money is set aside for your health care costs. If you are in good shape when it comes to your personal health, it can be an advantage since you will pay less money since a lot of that insurance will go unused. Those who are not quite as healthy might pay more since they will need insurance coverage more often, but for those who consider themselves in good shape and willing to take the chances, there is the risk of catastrophic injuries or serious illnesses that occur out of nowhere. Also, the IRS does put a cap on the amount that can be deposited. Recently, the limit has been $3000 for an individual or $6000 for a family.

According to the IRS regulations, money in an HSA can only be used to cover expenses related to office and hospital visits, medical testing, prescription medications, insulin, and medications that are over-the-counter but that have been prescribed to the patient. Unlike previous years, over-the-counter medication and medical products can no longer be purchased using HSA funds. This change went into effect in 2011.