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HSA Plan for a Family

Health insurance is a vital family concern. Parents want to make sure their family will be protected in case of any medical emergency or condition. One modern option established by the U.S. Treasury Department is to open a Health Savings Account. These accounts have a variety of benefits and tax implications for the families who opt to use them.

  1. Definition

    • A Health Savings Account is an account in which money is set aside to be used exclusively for medical purposes. An HSA allows an individual or family to deposit money into the account pre-tax. Money deposited into a Health Savings Account accrues interest. Those who have an HSA are able to use the money for medical purposes, and at age 65, the money becomes eligible for any purchases, according to MSA Info.

    History

    • Health Saving Accounts were first created in 2003. According to the U.S. Department of Treasury, HSAs were part of the Medicare Bill signed into law by President Bush. The law mandated that these accounts be linked to High Deductible Health Insurance.

    Function

    • When money needs to be paid to a medical institution, it is pulled from the Health Savings Account via check or debit card. The money has to be used for approved medical expenses, such as dental and doctor's fees, ambulance rides and surgical fees. Typically, these accounts come with deductible policies. As a family reaches the deductible limit, medical procedures are covered either at a percentage or in full, depending on the specific plan.

    Benefits

    • One major benefit to an HSA is the potential to save and earn money. When a patient is using traditional health insurance, his money goes directly to the insurance company every month, regardless as to whether medical expenses are required or not. With a Health Savings Account, though, the money is retained in a bank until it is needed. In the meantime, interest is generated and added to the account.

    Tax implications

    • Money put into an HSA is deposited pre-tax. The advantage of this for an individual or family who uses a Health Savings Account is that more money is actually deposited. In addition to pre-tax contributions, the Health Savings Account itself garners interest, tax-free. And, according to "The New York Times," there is no levy on earnings once the account is tapped for qualified expenses.

    Considerations

    • An HSA can be rather useful once money is saved in the account, but putting money in the account can be difficult for some families. As noted in The New York Times, if a family has financial difficulty paying for insurance to begin with, finding the extra money to save can be quite difficult to manage. As a consequence of this, the average household income is more than double for those who actively use an HSA versus those who do not.

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