To Your Health
February, 2007 (Vol. 01, Issue 02)
How Do You Use the HSA Money?
Now that you've acquired the high-deductible policy and set up the HSA, how do you get your money out? Third-party administrators, banks and insurance companies administer accounts on a fee basis.
The actual process of making withdrawals will be specific to each administrator. Money may be withdrawn on a tax-free basis as long as it is for a qualified medical expense. Funds from the HSA may not be used for health insurance premiums, except for the following:
- COBRA health care continuation premiums.
- Health care coverage premiums while receiving unemployment compensation.
- Qualified long-term-care insurance.
- Health insurance premiums for individuals over age 65, other than a Medicare supplement. (Approved plans would include Medicare Part A and B, Medicare+Choice and employer retiree coverage.)
These withdrawals may be made at any time. Unlike FSAs, HSAs encourage you to save your money by allowing the amounts to roll over and accrue tax-free over time. You can even earn interest tax-free on the money in your HSA. Ultimately, the best scenario would result in a bankroll to fund your health care expenses later in life. For this reason, HSAs should be added to all current Section 125 plans when a high-deductible plan is available.
Who Should Sign up for an HSA?
Some suggest only the healthy and wealthy will sign up for HSAs. This doesn't hold up against actual experience. Older workers and those who may need more health services see greater value in the control they get over their health choices. Experience shows that high-deductible policy-holders use preventive benefits, generic drugs and make wiser choices on discretionary expenses.
HSAs are getting more attention from the insurance industry than the MSA and HRA plans of the past decade. This renewed enthusiasm will bring more consumer-friendly programs to entice the public. Bankcards attached to your HSA will make using your HSA at the pharmacy or health care provider hassle-free. Unlike the claims forms required to receive reimbursement from Section 125 plans, the bankcard will act just like your ATM or debit card. This competition will help the consumer by driving premiums, benefits and provider networks to their favor.
HSAs offer two advantages you just can't get from regular health insurance: more control over your health care decisions and tax-free savings for future health care expenses. Wise health care consumers are recognizing these advantages and switching to HSAs. Ask your insurance agent, tax preparer and employer about the benefits of an HSA for you.
Paula L. Wilson is an expert in employee benefits, including life and health insurance. She can be contacted with questions at (951) 694-1009.