The Health Savings Account as a Solution for Rising Costs
Established as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Health Savings Account is a combination of features found in traditional health insurance plans married to retirement plans. The goal was a program to shield money for health care from taxes. Under a Health Savings Account qualified medical expenses might include medical doctors, dental and optical care, long-term care, chiropractic care, as well as Medicare Part A or Part B, and Medicare HMO insurance premiums.
The contribution to a Health Savings Account is permitted providing the health insurance accompanying it has an out-of-pocket deductible of at least $1100 annually for an individual, and $2200 for family coverage.
The Health Savings Account has a great benefit in tax breaks, since all contributions are pre-tax money. If the funds are then used for qualified medical expenses, the entire saved amount can be withdrawn free of tax burden. Unused balances in the Health Savings Account can be rolled from year to year.
With healthcare costs rising at an alarming rate, the Health Savings Account is a win for employees who participate. They take on a higher level of responsibility for medical expenses than with a traditional insurance policy, but the flexibility of moving the unused funds forward and having them tax free often outweighs the burden of a higher deductible. Because of that deductible, participants often learn not to seek unnecessary medical treatment and are careful to manage their visits to a physician.