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Q&A: Health savings accounts can be a viable option

Q&A: Health savings accounts can be a viable option

What exactly are health savings accounts? And when are these a good idea? Who should get one?

If you have a high-deductible health insurance policy, then you know that paying out-of-pocket for expenses until your deductible is met can be a challenging proposition.

Health savings accounts are interest bearing bank accounts that allow you to pay for qualified medical expenses and get a federal tax deduction on your contributions.

They keep the money for your medical expenses separate from your other savings and make payments easy to make. The interest rate will depend on the bank rates.

The maximum amount you can contribute to health savings accounts is $5,000 per year. Any unused amount from one year can be used the following year. In some states, you can even take a deduction for your contribution from your state tax obligations.

HSA’s can only be opened in conjunction with a high deductible insurance policy. Otherwise, you might consider a flexible spending account (FSA), which has many benefits similar to an HSA. An HSA has its own credit card which can be used for anything on its list of acceptable expenses.

In general you can expect to be able to use the account for deductibles, copayments, dental and vision expenses as well as prescriptions.

See also: Health savings accounts (HSAs) explained

Q&A: Need some advice on personal finance matters? If you have a question about or would like further explanation about a topic relevant to banking, credit cards, home loans, or insurance, please submit a question.

Posted in: Banking, Insurance

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