Benefits of a Health Savings Account

Health is wealth is very run-of-the-mill phrase. But the unpredictability in our lives has made it imperative to have a health savings account. A health savings account will help ease the financial pressure in an emergency situation.

A health savings account is a medical savings account available to the taxpayers. It has a lot of tax-related advantages. A health savings account opened with discretion can go a long way in ensuring an individual enough finances in case of an emergency. It is basically a pool of money, which can be kept aside and used for the medical expenses. This account can be self purchased or employer sponsored.

Benefits of a Health Savings Account

• The usage of money in a health savings account is totally dependent on the person who opens the account. However, in case of the money being used on non-qualified medical expenses, the benefits are lost.
• In case of company sponsored health savings account, there is no facility for a rollover from year to year. If you open an account yourself, you get the benefit of a rollover.
• This account is immune to income tax liabilities. So the amount of money saved will be more and fast.
• These accounts are quite easy to open. One should have the right kind of health insurance policy. Then most of the banks, insurance companies with high deductible plans help open a health savings account.
• In most instances, the account holder also gets a debit-type card, which can be used for the qualified medical expenses.
• The contribution to your health savings account by your employer are excluded from your taxable income.

Those who support health savings account propose that these accounts will bring down health care costs, as well as, enhance the efficiency of the health care system. However, the usage of the amount in a health savings account for non-qualified medical expenses can result into lapse of the benefits. So it is advisable that it is used only for qualified medical expenses.

Some of the expenses which come under qualified medical expenses for health savings account are for the treatment of acupuncture, alcoholism, birth control pills, blind services, crutches, hearing aid and batteries, Domestic Aid (rendered by nurse), drug addiction Recovery, drugs - prescription or over-the-counter, Dyslexia Language Training and Hearing Aids. It is also applicable for hospital care, insulin, laboratory fees, Lifetime Medical Care prepaid; retirement home, artificial limbs, nursing Services and obstetrical expenses.

Similarly, some of the non-qualified medical expenses (these don't qualify for the usage of amount from a health savings account) are babysitting, childcare, cosmetic surgery, dancing lessons, funeral expenses, future medical care, hair transplant, liposuction, medicines imported from another country, swimming lessons, teeth whitening and weight-loss program.

However, there are few disadvantages of health savings account. For instance, the benefits of this account slowly decrease with age. They usually have high deductibles, so it could well be the case that these high deductibles may leave a person with high medical bills. Another disadvantage is that their value can plummet, as they are linked to the stock market.

Everything considered, a health savings account is not a bad choice, even if there are a few liabilities associated with such an account.