A Health Savings Account (HSA) is awarded to a person with a High Deductible Health Plan (HDHP) to save up pre-tax dollars for medical bills. You can save as much money as you like per year, up to certain IRS limits, to cover a significant portion of your healthcare expenses.
Here are the important things you must know about a health savings account.
There is no HSA without a High Deductible Health Plan (HDHP). High Deductible Health Plan is a coverage plan with a higher deductible than the regular healthcare policy. HDHPs usually have lower monthly premiums, but the insured will have to pay for their medical expenses out-of-pocket before meeting the yearly deductible. After the deductible has been paid, your provider will begin to grant your benefits.
Health savings accounts are used to minimize the high out-of-pocket costs associated with HDHPs by allowing pre-tax dollars to be set aside to help control these out-of-pocket costs.
You can pay for your hospital bills through your HSA via the debit card, checks, or online payment option. If you have paid for your medical bills out-of-pocket, you are permitted to withdraw from your health savings account to reimburse yourself. Reimbursement can only be made for healthcare costs incurred after creating the HSA.
There are some steps to take to seek reimbursement from your health savings account. You can only request reimbursement via the HSA administrator, who will guide you through the process. The steps to follow may differ between administrators. Still, it usually does not involve stringent requirements like detailed documentation of the expenses that were incurred. Like payments, reimbursements can also be made via your HSA debit card, online transfer, or a check.
The check must be written from the HSA account to your checking or savings account, and the online transfer from your HSA account has to go into your other personal accounts.
It is advisable to keep a detailed record of all of your medical expenses, such as bills and receipts. You may need to report all your transactions, including transfer amounts and your total HSA withdrawals, to the International Revenue Service every year as you file your taxes.
There are other types of healthcare insurance accounts like flexible spending account (FSA) and health reimbursement arrangements (HRA). FSAs are similar to HSAs because both can be used to save up pre-tax dollars to cover out-of-pocket medical expenses. There is a slight difference between the two. While HSAs are created for those with high deductible healthcare plans, FSAs are often created by the employer of the insured person where the employer is free to add money to the account. This account ceases to exist after quitting or being terminated from the job.
Health Reimbursement Arrangements are employee-funded accounts in the United States of America to refund the employees for out-of-pocket healthcare expenses. It may also be used temporarily for insurance premiums. These accounts are created and funded by the employers who also get to enjoy the tax-free benefits.
This is all you need to know about how HSAs work, what they are used for and how you can be reimbursed for your expenses. Do you need help with your health insurance coverage? If so, then contact the experts at Randy Jones Insurance Services in Pleasanton, California today.
