Rx News

What is an HSA?

May 20, 2014

Health savings accounts (HSAs) are similar to personal savings accounts. The difference is, the money in your HSA is used to pay for your health care expenses. Also, you can own and control the money in your health savings account. The money you deposit into the account is not taxed, and to be eligible to open an HSA, you must have a special type of health insurance, called a high-deductible plan.

HSAs and high-deductible health plans were created as a way to help control health care costs. Doctors and other health care providers will have an incentive to lower their rates because they're competing for business. Like any health care option, HSAs have advantages and disadvantages. Look at your options and think about your budget and what health care you're likely to need in the next year.

You can control how your HSA money is spent. You can shop around for care based on quality and cost. Your employer may deposit to your HSA, but you own the account and the money is yours even if you change jobs and any unused money at the end of the year rolls over to the next year. But, Illness can be unpredictable, making it hard to accurately budget for health care costs. Some people find it hard to set aside money to put into their HSAs. People who are older and sicker may not be able to save as much as younger, healthier people.

So, before you make a decision, weigh your options. Speak with your employer. They may offer an HSA option or you can start an account on your own through a bank or other financial institution. To meet the requirements, you must be under age 65 and carry a high-deductible health insurance plan. If you have a spouse who uses your insurance as secondary coverage, he or she also must be enrolled in a high-deductible plan.