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Health Savings Account

Updated on June 1, 2023 , 358 views

What is the Health Savings Account?

A Health Savings Account meaning can be defined as an account that is used for saving the pre-tax dollars for health emergencies. You can put aside a few dollars in the health savings account to make the payments for deductibles and hospital fee that’s charged before you get to claim the insurance. This allows you to finance the emergency health care cost. Note that you cannot use the health savings account for paying monthly or annual premiums. People who have applied for the HDHP (high Deductible health plan) are allowed to contribute money to the health savings account. You get to withdraw funds from this account anytime you have a medical emergency.

HSA

According to the 2020 amendments in the HSA, the individuals are allowed to add up to $3550 for their personal coverage and an amount up to $7,100 for the family coverage to the health savings account. This saving account is especially used to cover all sorts of medical expenses that are not covered under high deductible health plans.

The amount can be contributed either by an individual or the company they are working for. As mentioned above, there is a fixed limit for the maximum amount that you are allowed to deposit into the health savings account. You could open the HSA with the insurance company you have purchased from. The money you withdraw from the account must be used strictly for medical expenses or dental care.

How does HSA Work?

As mentioned before, an individual who plans to contribute to the health savings accounts for their personal or family coverage must have the HDHP subscription. HDHP can be defined as the health insurance coverage that comes with a higher than the standard deductible.

The health insurance can’t be claimed until the insured has paid the deductible. Now, the deductible is the amount you have to pay out of pocket before you are eligible for claiming health insurance. More than 80 to 90 percent of the medical expenses you incurred will be covered by the insurance. However, you cannot claim it until you pay the deductible.

Suppose you invest in the HDHP that comes with an annual deductible of Rs.150,000. Now, the HDHP covers your medical expenses up to Rs.350,000. In order to become eligible for this coverage, you are supposed to pay the first Rs.150,000 deductible on your own. You must check the Insurance Coverage before signing the deal. This means the insurance company will only cover your medical bills and hospital expenses if you manage to pay the deductibles. That’s exactly what the health savings plan is designed for. It allows you to finance the deductibles and other forms of co-payments that are excluded from the high deductible health plans.

You could open the HSA account at the Bank or other financial institution. Alternatively, the insurance provider will offer you the health savings account alongside HDHP. The qualification criteria require you to have only the HDHP coverage.

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