How a Health Savings Account Works    

Health Savings Accounts (HSAs) are simple and easy to understand. A Health Savings Account (or HSA) is a tax-favored savings account combined with a qualifying  high-deductible health insurance plan . HSAs enable you to take control of your own health care decisions by allowing you to deposit tax-deductible funds into an account that you can use to cover medical expenses.

To start, you must have a high-deductible health insurance plan that qualifies to be combined with an HSA account. These plans are available through many different insurance companies. The plans are all similar in that they all have deductibles ranging between $1,200 - $5,950 for singles, and $2,400 - $11,900 for families.

Once your insurance policy is in place, you may begin to fund your HSA account.  

Tax Deductible Contributions

HSA’s allow you to avoid federal income tax by saving up to $3,050 for singles or $6,150 for families, into your HSA account. There is no minimum deposit, but whatever you deposit into your account counts as a tax deduction for income taxes. You get a federal income tax deduction for money you put in, even if you take the standard deduction and don’t itemize deductions. This tax deduction is available to everyone, with no limitations on the amount.  

Tax and Premium Savings

Health Savings Accounts can save you money on your insurance premiums, as well as your income taxes. Compared to a traditional plan, health insurance premiums are usually much lower with an HSA. In addition, there is no other investment vehicle that allows you a tax deduction from day one, combined with the ability to take a tax-deductible withdrawal immediately, if needed. The total savings that can be achieved from the lower premiums along with the tax-free deductions could be $5,000 or more every year. That kind of money could certainly cover the lease of that new BMW you’ve been eyeing! Or invest it back into your business! 

Tax-subsidized Medical Expenses

Though you have received a tax deduction by putting your money into this account, the money still belongs to you, and can be spent tax free, provided you spend it on qualified medical expenses. Naturally, this would include expenses generated from going to the doctor, buying prescription drugs, or paying other expenses that count toward your deductible. Once you have met your deductible, the health insurance covers your medical expenses according to your policy (many HSA plans cover 100% after deductible).  

Besides being able to withdraw your money tax-free to cover these types of expenses, you can use the funds in your HSA account to cover other costs that aren’t normally covered by a traditional health insurance plan.  

These include:

• Dental expenses. Including Braces and other necessary procedures.
• Mental therapy. This includes the charges of psychiatrists, psychologists, psychoanalysts, and psychotherapists.
• Physical therapy. This could include hydrotherapy, chiropractor services, or medical massage therapy.
• Alternative treatments. This could include acupuncture, Ayurvedic Medicine, aromatherapy, homeopathy, Traditional Chinese Medicine (TCM), nutritional consulting, or even healing services provided by a Christian Science Practitioner or other type healer. 
• Transportation and lodging expenses, when related to health care
• Charges incurred as part of a preventive health program. This could include vaccines, blood tests, metabolism tests, and other lab tests, and even fees paid to a health institute or vitamins if prescribed by a doctor.
• Nonprescription medications, such as aspirin or cough syrup
• Long Term Care Insurance premiums to pay for qualified long-term care
• Maternity expenses that are not covered by your health insurance policy

Also note that the HSA account can be used to pay these expenses for any spouse or dependent member of the family, even if they are not covered under the insurance policy. (That should get those wheels turning!) 

How to Learn More and Choose the Right HSA Plan  

Making sure you have the correct HSA plan for you and your family’s need is crucial. With multiple companies offering multiple HSA Health Plans, it can seem overwhelming. And not all plans are created equal! One company may offer preventative services on a first dollar basis, while another does not. One company may not accept a pre-existing condition, while another does. 

To help you sort through the various options and find the right plan for you, it’s best to talk with an Independent Insurance Broker who has experience with HSA’s.  

My company, NorthWest Georgia Insurance, is one such Independent Brokerage. We specialize in helping business owners, self employed and individuals navigate the craziness that is the health insurance industry. We can help you find the right plan, at the right price. We can even help show you how you can write off MORE of your medical expenses for tax purposes (often $1,000’s of dollars in extra write-offs)! 

Best of all, our services are 100% free to you! 

Do you have employees that you either already provide coverage to, or want to provide coverage to? We can show you how to offer better coverage, at less expense to you. The traditional way of offering insurance, and dealing with 30% rate increases each and every year is outdated; There are simply better (and more cost-effective) ways to offer your employees outstanding benefits! 

So contact us today, and let us help you improve your coverage, and save money! You can reach us via email, phone, or even LinkedIn! You can also click the "Get a Quote" button at the top of the website to reach us. 

Bret Vanderplough
NorthWest Georgia Insurance
o- 770-407-1535
c- 404-275-9000
bret@nwgeorgiainsurance.com