A health savings account is a personal savings account for medical expenses, but eligibility depends on having a high deductible health insurance policy and not receiving Medicare. The account must be funded with personal money and can be obtained through an employer or a stand-alone account.
A health savings account is like a personal savings account, but you can only withdraw funds for medical expenses or you will be penalized. The first step when trying to open a health savings account is to determine if you are eligible for this type of account, as not everyone is. You will need to have a current high deductible health insurance policy. Explore the options and plans available or offered in your area, and have a financial plan to fund the account.
Although most do, there are some states across the United States that do not allow health savings accounts. Determine if you live in a state that allows it. If your state doesn’t, you won’t be able to set one up. To open a health savings account, you must be under age 65 and not receive Medicare. Review your health status to decide if the health savings account is the best type option for you. If you are generally healthy with no extensive or chronic medical problems, a savings account may be a good option.
To qualify to open a health savings account, you must not have any other type of health insurance other than a high deductible policy. In general, if you can’t meet a high deductible and have health problems or anticipate increasing medical expenses, these types of policies will not be a good fit for you. The high deductible policy is like a safety net, should something catastrophic happen and you need extensive care beyond the deductible, your medical expenses will be covered accordingly.
To open a health savings account, you must find a plan. Some employers offer health savings accounts just like they offer other health benefit plans. Ask the human resources department for information about health savings accounts. However, you may have to wait until open enrollment to add the plan to your current benefits. If your employer does not offer health savings accounts, you may choose to find a stand-alone account. Check with a local health insurance sales agent or the National Association of Health Insurers.
Finally, to open a health savings account you must have the money to fund the account. The money deposited in the account is yours and you have full control over it. If you withdraw funds for reasons other than medical expenses, a 10 percent fee applies and is taxed by the government. The amount of money you can put into the account varies annually with inflation, but is generally around $3,000 US for individuals. Once you start receiving Medicare, you will no longer be able to add money to the health savings account.
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