This article is provided by M3 Insurance. It is to be used for informational purposes only
and is not intended to replace the advice of an insurance professional. Visit us at
http://m3ins.com. © 2010–2011, 2013 Zywave, Inc. All rights reserved.
HSA Pros &
The health savings account (HSA) is a
growing trend in health care, but is it right for
you? An HSA is a cost-effective option for
many individuals and families, but it is not
the best choice for everyone.
Comparing HSAs to traditional health plans
can be difficult, as each has pros and cons.
For example, traditional health plans typically
have higher monthly premiums, a smaller
deductible, and fixed copays and/or
coinsurance. You pay less out-of-pocket due
to the lower deductible and copay, but pay
more each month in premium.
HSA plans generally have lower monthly
premiums and a higher deductible. You may
pay more out-of-pocket for medical
expenses, but you can use your HSA to
cover those costs, and you pay less each
month for your premium.
HSAs are designed to offer the user triple tax
benefits – you put money in tax-free, it
accrues interest tax-free and you can
withdraw it tax-free (for qualified medical
expenses). You can budget how much to
contribute, and unspent dollars are rolled
over each year, making it a good retirement
savings vehicle as well. In addition, UWMF
may choose to contribute to your HSA.
It is tough to accurately budget for your yearly medical expenses, as illness is
unpredictable. Also, finding accurate information about health care costs is
sometimes difficult, reducing your ability to budget for expenses. If you do not budget
enough for a given year, you may have significant, unexpected out-of-pocket costs,
especially if you face a large medical expense. Also, because the HSA is such a
valuable savings opportunity, some people forgo care they need to avoid spending
money from the account.
How to Decide
The decision is different for each individual. If you are generally healthy and/or have a
reasonable idea of your annual health care expenses, then you could save a lot of
money from the lower premiums and valuable tax-advantaged account with the HSA
plan. For example, even someone with a chronic condition could take advantage of
an HSA if you have an idea of your annual expenses and budget enough money to
cover your care.
However, if you are older, more prone to illness or unexpected medical conditions, or
prefer certainty in medical costs to the possible risk of unexpected out-of-pocket
expenses, you may want to stick with a traditional plan. You’ll pay more in monthly
premiums, but will have fixed copay and/or coinsurance amounts.
To determine if an HSA is right for you and how much you might save in taxes, check
out the following calculators: www.hsacenter.com/hsa-calculators.html.
An HSA is a cost-effective option for many individuals
and families, but it is not the best choice for everyone.