Times are tough, and everyone could stand to save a bit of money these days.  One important money-saving option to consider is a health savings account (HSA).  By pairing a Texas health savings account with a high deductible health plan (HDHP), individuals can save up to of 40 percent on health insurance premiums. Contributions made  to your HSA are  on a pre -tax basis—similar to contributions made to an IRA—but unlike a traditional IRA, you are not penalized when you withdraw money for eligible medical expenses that are under your deductible . Instead of paying high monthly health insurance premiums, individuals with HSAs use the money they save for any medical expenses they incur, thereby controlling how their health care dollars are spent.  Any money left in the account at the end of the year rolls over year after year, on a tax deferred basis,  and this money accumulates on a tax free basis.  It doesn’t get any better than that!

It’s important to note that an HSA cannot be combined with just any high deductible health insurance plan. The IRS has set specific guidelines to determine if a high deductible plan is HSA-eligible. Because of these guidelines and the variations of state underwriting requirements, it’s helpful to contact a Texas health insurance broker to guide you through the process.

This is definitely not your traditional health insurance plan.  Individuals accustomed to HMO or PPO plans, with set co-pays and select health care providers, might find a health savings account to be a refreshing change.  With an HSA, consumers are accountable for their own health care spending and are empowered to make the decisions best suited to their health and budget.  Saving some money while taking back control of our own health care is something we could all use more of these days.

As we begin a new year, many Texans are looking for more options to help them maintain financial stability as health care costs continue to rise. Two available options are Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA). It’s important to understand the differences between FSAs and HSAs when considering your Texas health insurance options.

What is an FSA?

An FSA is an employer-sponsored benefit that allows you to set aside a predetermined amount of your income for medical expenses not covered by your health insurance policy. The money is removed from your paycheck “pre-tax,” thereby decreasing your taxable income and increasing your spendable income.

There are also some drawbacks to FSAs.  First, the beginning of the year is the only opportunity you have to enroll in an FSA, unless there is a significant change in family status. Second, the medical expenses that can be reimbursed through your FSA are determined by the IRS, so you must be familiar with the list of approved expenses before determining how much money you want withdrawn from your paycheck.  Finally, any unused money in your FSA at the end of the year is lost. It DOES NOT roll over; this is sometimes referred to as a “use-it-or-lose-it” plan.

There are many benefits to having an FSA, but much preparation must be done before using this tool to maintain your health care expenses.

What is an HSA?

An HSA is a tax advantage savings account that allows you to contribute and withdraw money for qualified medical expenses without being taxed.  Similar to an IRA, HSAs are investments, controlled by the owner (you), allowing you to grow your wealth while being taxed less and preparing for future medical expenses. Qualified medical expenses include doctor visits, prescriptions, dental appointments and even massages and health club memberships. Another advantage to having a Texas health savings account is that any money contributed to your account will roll over every year on a tax deferred basis, which allows your money to accumulate, unlike the “use-it-or-lose-it” FSA.

The only requirement to opening an HSA is to have a high deductible health insurance plan, which is a type of health plan that has a higher deductible than common health care plans and has a maximum out-of-pocket limit. These plans usually have lower monthly premiums, providing HSA owners another way of decreasing health care costs.

Since an HSA allows you to prepare for future medical expenses, decrease taxes, increase opportunities to earn wealth and pay smaller monthly health insurance premiums, it’s a great option for combating the rising cost of health care.