By now, you’ve probably heard something about Health Savings Accounts (HSAs). With the cost of health insurance increasing at an alarming rate, consumers throughout the country are searching for lower-cost solutions. For many people, the best answer is an HSA and ACRP’s member benefit program now includes access to this innovative new option. On this website, members will find the information they need to understand HSAs and help decide if the concept is right for them.

HSAs really are new – they have only been available since Janaury, 2004. The enabling legislation is much better known for the prescription drug benefits it provided for the first time to senior citizens but The Medicare Prescription Drug Improvement and Modernization Act of 2003 also authorized the creation of Health Savings Accounts.

So, in a nutshell, what is an HSA? At its core, the concept is quite simple. Anyone who takes out a “qualifying high deductible health insurance policy¹” can also open a special tax-deferred savings account dedicated to health care expenses. Because it does not pay for routine medical expenses, a high deductible policy costs 20% to 40% less than traditional policies while still providing full coverage for catastrophic accidents or illnesses. The companion health savings account is used to pay, on a pre-tax basis, regular medical expenses which do not exceed the deductible.

HSAs have been called “Medical IRAs” by some proponents of the idea and it is easy to understand the basic concept by thinking of it that way. An HSA is treated, for tax purposes, much like an IRA:

• the money you deposit in an HSA reduces your taxable income dollar-for-dollar;
• interest earned by the HSA is not subject to current year taxation;
• money paid out of the HSA for health care expenses is not taxed;
• you can take money out for non-health care expenses but it becomes taxable income and is subject to a penalty.

Another common comparison is to Flexible Spending Accounts (FSAs) which are a popular feature of many employer group benefit plans. “Use it or lose it” is how FSAs work. Any money left in your FSA account at year end is forfeited. Under an HSA, the opposite is true – any money left unspent remains in your account. In effect, HSAs are “use it or keep it”.

“Paying yourself” is also a good way to think about HSAs. Instead of forking over high premiums to the insurance coverage for very comprehensive coverage, consider paying part of that premium to yourself. That’s exactly what you are doing when you buy a lower-cost high deductible policy and redirect the savings in to your own Health Savings Account.

1. You are basically in good health, free of chronic conditions and generally only visit a doctor a few times a year for simple conditions like a cold, etc. and/or an annual physical, and
    
2. You have the financial ability and discipline to fund the savings account.

If you’re interested in knowing more, please explore this website thoroughly and then request a quote. Or, if you prefer to discuss the subject with a qualified advisor, call
(804) 273-9797 between 8:30 AM and 5 PM (Eastern Time).