Private Health Savings Accounts - Tax Deductible

How Being Healthy Can Earn You Money
By Julie Harju

Consumer-Driven Health Insurance:

For many people, the ability to save money is almost an impossibility. Expenses like mortgage payments, utilities and health insurance suck up monthly paychecks. There is a way to make your health insurance coverage actually help you earn money. Health savings accounts (HSA's), the newest tax deductible way to set aside a little extra every year, also help earn interest for the future. And if, like most Californians, you're able to stay healthy, the tax deductible savings could turn into a tidy little retirement plan, a new boat or car, or a luxurious vacation you never thought you could afford. By choosing an HSA plan for your health insurance, you get:

-- a tax deductible health savings account
-- a compounded rate of return
-- excellent health insurance coverage for routine and preventative care once the deductible is met

There is a tradeoff and it's the best tradeoff you could possibly make these days-- the deductible amount on insurance plans with HSA's are higher. However, the health insurance coverage still functions just like a regular plan to cover your medical expenses. Why would someone choose this type of plan, to lower their cost of monthly premiums and these benefits?

Consumer-Driven Health Features:

--HSA's and health insurance plans still protect in the event of high or unexpected medical bills
--monthly premiums are lower
--you can save the money for medical expenses and grow the account through investment earnings
--you control the decisions as to how much money goes into the account
-- you control any investments you wish to make with money from the HSA
--all accounts are portable in the event of change in medical coverage, change in job, unemployment or change in marital status

The biggest savings come on taxes-- there are three levels of tax savings in HSA's.

--tax deductions when you contribute to the account
--tax-free earnings through investment
--tax-free withdrawals for qualified medical expenses

A family with an income of $40,000 per year, for example, contributing $1000 into their HSA will have a $150 deduction in federal income taxes (example from 2005). By contributing $2000, the same family will receive twice that amount-- a $300 savings in federal income tax.

If you do the math, an HSA makes the most sense for savings and for health. For example, say your deductible amount is $5000. Once you have that amount in your HSA, your deductible is covered in case of emergency. It's also earning tax-free interest, compounding year after year. The bottom line is that you and your family have the security of knowing that if an emergency happens, the money is there to cover the deductible. And if it doesn't, then the money is there to work for you, helping you earn interest and save money for the future.

These plans are so effective and will become the main stream insurance plan and it can be used for a small business plan or individual plan. Follow this link to receive a small business medical insurance quote for HSA's, and also information for family or individual quotes on HSA's.

There's no reason to lose money on health insurance. By taking that extra money that you would spend on premiums and saving it, you're not only insuring your future health care costs will be covered, you're saving some money for your future and lowering your
tax bill.

This article makes reference to the United States Department of the Treasury web site at http://www.treas.gov/offices/public-affairs/hsa/.