Year after year, health care and medical insurance costs outpace inflation. It’s little wonder, therefore, that business owners and employees are scrambling for ways to curtail health care expenses. One option worth considering is a health savings account or HSA.
* How HSAs work. An HSA works in tandem with a high-deductible health plan (HDHP). To qualify as an HDHP, the policy’s deductible (for the 2013 tax year) must be at least $1,250 for an individual or $2,500 for a family. You sign up for an HDHP policy with an insurance company and an HSA with your employer. Throughout the year, you deposit money in your HSA using pre-tax dollars, subject to certain limits on annual contributions. (For 2013, HSA contribution limits are $3,250 for individuals and $6,450 for families.)
When medical bills come due, you’re allowed to withdraw money from this account, tax-free, to cover out-of-pocket costs, including your deductible, payments for prescription drugs, and medical bills not covered by your insurance policy.
If you’d like more information about HSAs, give us a call.
Written by: Doug Rodrigues