Wading through health insurance options when starting a new job or during open enrollment can be confusing.
The alphabet soup of terminologies sure doesnt help.
That way, you’re able to make the best decision for yourself and your family.
When Insurance Falls Short…
Unfortunately, insurance doesnt covereverything.These resourcescan help you manage those unexpected expenses.
What Is an HSA?
HSA stands for health savings account, which is distinctly different from a regular savings account.
you might use your HSA funds to pay for medical costs as you incur them.
You also can let the money in your HSA account grow by investing those dollars.
There are a bunch of financial benefits to having an HSA, which well discuss later.
First, its important to know how to open a health savings account.
Need Easy Money to Cover What an HSA Doesnt?
Having a health savings account is a great way to help pay for your health care costs.
However, it might not covereverythingyou need when it comes to your medical care.
How Do You Open a Health Savings Account (HSA)?
You cant open a health savings account with just any health plan with a high deductible.
Banks, insurance companies and other qualified HSA trustees offer health savings accounts.
If youre 55 or older, you might contribute an additional $1,000.
These contribution limits include any HSA funds your employer adds to your account.
Any savings you dont spend in a current year roll over year after year.
The money in your HSA stays with you even if you switch insurance plans, change jobs or retire.
In some cases, youll have to pay out of pocket and get reimbursed later.
You also arent taxed when youspendHSA dollars, provided youre spending the money on qualified medical expenses.
Can you say free money?
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But youll still be taxed for it.
Other challenges exist not with health savings accounts directly, but with having a high deductible health plan.
Some people arent able to pay for health costs out of pocket before meeting their deductible.
For some, that means forgoing medical care.
These plans became a little more friendly for people with chronic conditions, Fronstin said.
Flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs) are other options.
If you leave your job, you forfeit the money in your FSA.
Also, you have to use all the money in your FSA within the calendar year.
Funds generally do not roll over.
The contribution limits also differ.
They can be used in conjunction with any pop in of health insurance plan.
You dont have to report HRA reimbursements on your income tax return.
All three options can help you save money on medical expenses.
Nicole Dow is a former senior writer at The Penny Hoarder.
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