Health Savings Accounts

With healthcare costs continuing to rise in the U.S., many employers have been forced to reduce health benefits, shift more costs to employees or drop coverage entirely.

Less than two-thirds of all employers now offer health insurance to their employees and many self-employed people find it challenging to provide coverage for their families.

Meredith Village Savings Bank offers a solution to the problem by providing Health Savings Accounts – tax-advantaged, interest-earning accounts established exclusively for the purpose of paying or reimbursing qualified medical expenses. Authorized by the Medicare Modernization Act of 2003, Health Savings Accounts (or HSAs, as they are commonly called) can help raise consumer awareness of the real costs of health care and give individuals greater decision-making control over their medical spending.

HSAs allow account-holders and family members to write checks – or use a special debit card – to pay medical bills that are not covered by their health insurance provider. A high deductible health plan is required to open a health savings account.

Health Savings Account Benefits:

Tax Savings

An HSA may provide triple tax savings:

Tax deductions when you contribute to your account
Tax-free earnings; and,
Tax-free withdrawals for qualified medical expenses

Ownership

Funds remain in the account from year to year, just like an IRA. There are no “use it or lose it” rules for HSAs.

Portability

Accounts are completely portable, meaning you can keep your HSA even if you:

Change jobs
Change your medical coverage
Become unemployed
Move to another state
Change your marital status

Control

You make the decisions about:

How much money to put into the account
Whether to save the account for future expenses or pay current medical expenses
Which medical expenses to pay from the account
Which company will hold the account
Whether to invest any of the money in the account
Which investments to make

Savings

You can save the money in your account for future medical expenses and grow your account through investment earnings. Plus once you turn 65, you can use your HSA for all expenses – not just “qualified medical expenses”.

Flexibility

You can use the funds in your account to pay for current medical expenses, including expenses that your insurance may not cover, or save the money in your account for future needs, such as:

Health insurance or medical expenses if unemployed
Medical expenses after retirement (before Medicare)
Out-of-pocket expenses when covered by Medicare
Long-term care expenses and insurance

Affordability

You may be able to lower your health insurance premiums by switching to health insurance coverage with a higher deductible.

Security

With high deductible insurance and an HSA you are better equipped to deal with high or unexpected medical bills.

Consult your tax advisor for more information on how these benefits may apply to you.

For more information:

The IRS and US Department of the Treasury offer up to date information about HSAs on their websites.