Fundamentals of Health Savings Accounts (HSA)

Health insurance is a great thing, if you are one of the lucky people whose employers provide it or who can afford to pay full price from a private company. It would be great if you could just go to the doctor and get your checkup without having to shell out any money from your own pocket, but most insurance providers require that their insured parties pay a small co-pay. A trip to the doctor is usually followed up by a trip to the pharmacy where even if you have prescription coverage you can end up paying a small fortune.

Unfortunately, for most of us illness and injury usually comes when we have no money in our budget to spare for health care. A $20 co-pay or a $4 prescription might not seem like a lot a money, but for some this can be the difference between putting food on the table or having enough gas to get to work for the remainder of the week.

Wouldn't it be great if your employer offered a service where you could put a small portion of your earnings into a fund to use for medical related expenses? With the increasing cost of health care, many companies have begun offering their employees a product known as a Health Savings Account, often referred to as an HSA.

Setting up an HSA requires each individual employee to determine the amount of money they want to have set aside for covering their medical related expenses. This account is generally used in conjunction with group health insurance provided by an employer. While most companies pay a portion of their employee's insurance rate, the money put into the Health Savings Account is paid solely by the person being insured.

When a person with an HSA goes to the doctor or needs to get medicine to help cure an illness or infection they pay out the required co-payment or prescription cost. Once this money has been paid to the doctor a pharmacy the patient then sends an invoice to their insurance company who then reimburses them for the out of pocket cost. It works like a savings account for your medical expenses.

A traditional Health Savings Account has many useful qualities, however, if a person does not send their receipts into the insurance company with the request for reimbursement they will never get their money back and essentially pay for an item twice. Also with an HSA the insured must use the money in their account by the end of the twelve month cycle. If they do not use all the funds in the account they will forfeit any remaining money in the account. Another advantage to a Health Savings Account is that when money is taken from your earnings it is done before taxes are deducted.

For more information on Health Savings Accounts check with your employer or your group benefits provider.