Benefits of a Health Savings Account

Posted in Health Insurance , Health Savings Account

February 24th, 2009

If you are enrolled in a high-deductible health plan (HDHP) then you qualify for a health savings account.

In case you’re not sure what a high-deductible health plan is, it’s what it sounds like: an insurance policy that comes with very high deductibles that you must pay before you can actually be covered. These deductibles can be so high that they bankrupt those who have to pay them, which is why Congress created health savings accounts, which are designed to help people save for the payment of their health insurance deductibles, should they have to.

How do Health Savings Accounts Work?

Health savings accounts act like 401Ks or IRAs. If you have one, you put money into it, which is then invested in the stock market. If the stock market does well, so does your HSA.

Benefits of HSAs

While health savings accounts (known as HSAs for short) have many critics, they also have their supporters. People who think HSAs are a good idea stress their flexibility and their ability to grow and make money for not just their owners but the economy as a whole. And of course, people who have had to access them in order to pay their deductibles have found them quite useful too — if you have a deductible of $75,000 and your health savings account has enough to cover that deductible, you’re going to breathe a serious sigh of relief that that is paid for.

Another benefit of the health savings account which people may be forgetting, given the current economic crisis, is that the health savings account can really boom when the stock market does well. Your health savings account might have shriveled in the past year, but it could become robust again in, say, two or three years when the stock market comes back.

To learn more about the benefits of a health savings account, be sure to discuss it with a financial adviser as well as a trusted representative of the health care industry. You should know as much about an HSA as possible before you commit your money to it.