|  | Healthcare Industry | Health Insurance

Drawbacks to a Health Savings Account

A health savings account is similar to an IRA, which allows users to deposit money into an account to use for out-of-pocket medical expenses. The plans couple a health savings account with a catastrophic or high-deductible insurance plan. The funds in the account pay for medical expenses until the deductible is met and the insurance plan kicks in to pay medical costs. The health savings accounts allow consumers to afford health insurance with lower premiums. While the plans may work for some consumers, others may find the disadvantages of the plans difficult to manage.

  1. Fees

    • One of the drawbacks of a health savings account plan is the fees banks charge for opening the account. A bank may charge consumers a fee to open an account as well as monthly maintenance fees for accounts that do not meet minimum deposit amounts. In the beginning, consumers may find that fees eat a large amount of their deposit, making it more difficult to reach the minimum deposit amount.

    High-Deductible Policies

    • A health savings account must be paired with a high-deductible insurance policy. The minimum deductible for a qualified health insurance plan is $1,200 for individuals and $2,400 for families, as of 2010, according to Rutgers. The maximum amount of out-of-pocket expenses for a qualified health insurance plan for individuals is $5,950 and $11,900 for families.

    Caps on Deposits

    • The plans also cap the amount that can be deposited into the health savings account. The limit for individuals is $3,050 and $6,150 for families on the account as of 2010, according to Rutgers. The plans do allow individuals between ages 55 and 64 to make catch-up contributions to the account for $1,000 for 2010. For those hoping to use the funds in retirement, the cap can significantly affect the amount of money saved for health expenses in old age, according to Physicians for a National Health Program.

      Users of health savings accounts face penalties for any money withdrawn from the account that the depositor does not use for medical expenses. Withdrawals from the account before age 65 are subject to a 10 percent penalty and added to gross income for tax purposes. The accounts do allow an exception for death or disability for account holders under age 65.

Health Insurance - Related Articles