Health Savings Account (HSA)

There have been changes in healthcare that have affected most Americans. The Affordable Care Act (ACA) had great intentions of insuring all residents however it has fallen short. Because of this, most Americans have seen a dramatic rise in not only their premiums, but their deductibles too. Some feel this is the beginning of a national health care system but that would fail on an even larger scale. So, there have been changes in regulations with regard to health care costs and the HSA is truly amazing.

The HSA is designed to have up to $5000.00USD a year in tax-deductible health benefits. So what exactly does that mean? I hope to explain in a simple manner using simple math, as I have a 100 word vocabulary and am terrible at explaining things. I’m sure my sentence structure is worse.

Let’s say you make $40,000 a year with 25% taxation (thus you bring home $30,000 and $10,000 is income tax). You employment doesn’t offer health insurance, or you’re self-employed, etc. Thus, you must purchase health insurance. Let’s say you find a plan for $250 a month. That’s $3000 a year in policy purchase, not all medical expenses, but the ongoing cost. You likely have a deductible, let’s say $2000 just to make the math easier later on. Thus it could cost up to $5000 year before insurance coverage.

By funding your HSA and paying for all those expenses through the HSA, that would all be refunded to you on your tax return. The key, which most people will not like, is that you have to front the HSA costs to get the deduction in the back (on your tax return).

That is great but who has $600 a month extra to fund this? Not many people. However, I know you’re paying something every month. No matter what that amount is, fund your HSA with it, and then pay your premium. It is a kind of shell game but, just like any game, you don’t win if you don’t play. By doing so, only your deductible is what you would pay which is much less stress and if planned accordingly, you can plan for these extra costs, fund the HSA, and have the deducted as well.

Let’s say your employment offers health benefits thus you do not have to purchase health insurance. I would still fund the HSA as much as possible as you will likely have a deductible of some kind. It covers vision, dental, medicines, DME, and other medical modalities. Again, that will be deducted from your taxes.

I’m blogging this because I see very hard working people that feel like they can’t afford medical care. Insurance does cover you after these numbers have applied. I believe up to $5000 in “free” medical care should make most people feel satisfied about their health care.

You can apply for a HSA through your HR department at work. If your company has a payroll service, it will be shown there or may be initiated there. If not, I believe that major banks offer personal HSA although I’ve only seen one so far. Now go and take care of yourself!

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