By Brad Sherman via Iris.xyz
You’ve likely heard that having an HSA can help you to lower the cost of your medical care – but studies have shown that only 17% of people enrolled in group health plans are using their HSA. And of the people who are using their HSA, only a few of them are contributing the maximum amount each year. This gap is largely because not everyone knows about HSAs or their many benefits. As is usually the case with personal finance, the more you know, the better decisions you’re able to make. So let’s take a minute to break down what, exactly, an HSA is and how you can use it to your benefit.
What is an An HSA?
An HSA, or Health Savings Account, is attached to High Deductible Health Plan insurance coverage (HDHP). In order to open an HSA, you have to be enrolled in HDHP insurance. The HSA is intended to offset the high medical costs often associated with HDHP insurance coverage – which has a high deductible (hence the name), and puts group members in a position where they have to pay out of pocket for most non-essential care services until their deductible is met.
Your HSA is funded with pre-tax money, and it grows tax free.. More importantly, it rolls over from year to year, so you’re continually growing your funds without feeling pressured to use them immediately. Keep in mind that your HSA funds can only be used for qualifying medical expenses. This can include everything from doctor copays to hospital bills to a box of bandaids from your local grocery store. Putting money aside into an HSA helps to lower your taxable income while still preparing for a medical emergency, or even just offsetting smaller medical expenses – like taking your kids to the doctor.
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