With healthcare costs continuing to rise in the U.S., many employers have been forced to reduce health benefits, shift more costs to employees or drop coverage entirely.
Less than two-thirds of all employers now offer health insurance to their employees and many self-employed people find it challenging to provide coverage for their families.
Merrimack County Savings Bank offers a solution to the problem by providing Health Savings Accounts – tax-advantaged, interest-earning accounts established exclusively for the purpose of paying or reimbursing qualified medical expenses. Authorized by the Medicare Modernization Act of 2003, Health Savings Accounts (or HSAs, as they are commonly called) can help raise consumer awareness of the real costs of health care and give individuals greater decision-making control over their medical spending.
HSAs allow account-holders and family members to write checks – or use a special debit card – to pay medical bills that are not covered by their health insurance provider. A high deductible health plan is required to open a health savings account.
Health Savings Account Benefits:
An HSA may provide triple tax savings:
- Tax deductions when you contribute to your account
- Tax-free earnings; and,
- Tax-free withdrawals for qualified medical expenses
Funds remain in the account from year to year, just like an IRA. There are no “use it or lose it” rules for HSAs.
Accounts are completely portable, meaning you can keep your HSA even if you:
- Change jobs
- Change your medical coverage
- Become unemployed
- Move to another state
- Change your marital status
You make the decisions about:
- How much money to put into the account
- Whether to save the account for future expenses or pay current medical expenses
- Which medical expenses to pay from the account
- Which company will hold the account
- Whether to invest any of the money in the account
- Which investments to make
You can save the money in your account for future medical expenses and grow your account through investment earnings. Plus once you turn 65, you can use your HSA for all expenses – not just “qualified medical expenses”.
You can use the funds in your account to pay for current medical expenses, including expenses that your insurance may not cover, or save the money in your account for future needs, such as:
- Health insurance or medical expenses if unemployed
- Medical expenses after retirement (before Medicare)
- Out-of-pocket expenses when covered by Medicare
- Long-term care expenses and insurance
You may be able to lower your health insurance premiums by switching to health insurance coverage with a higher deductible.
With high deductible insurance and an HSA you are better equipped to deal with high or unexpected medical bills.
Consult your tax advisor for more information on how these benefits may apply to you.
For more information:
The IRS and US Department of the Treasury offer up to date information about HSAs on their websites.