It’s no secret that healthcare is expensive. Most people don’t have much in the way of savings to begin with, and with the exorbitant costs of healthcare, many are just one health emergency away from poverty. Families need a way to set aside money for healthcare costs. Enter the Health Savings Account. Exactly what it sounds like, it’s a savings account specifically for healthcare costs.
Lapse in Insurance
There are multiple reasons why you might experience a lapse of insurance. Regardless of the reason, this can be an especially risky time for your family. Routine doctor appointments that would have been free or inexpensive suddenly cost a pretty penny. Emergency situations can strike at any time, resulting in a trip to the hospital that can easily cost tens of thousands of dollars. Since the funds in an HSA are specifically set aside for use on medical bills, saving money in that account can help make up for your lack of coverage.
Surprise Medical Bills
Surprise medical bills are bills patients receive after being given care at an in-network facility by an out-of-network provider. These bills are supposed to make up the difference between what your insurance is willing to pay and what the provider charges. More than 90% of healthcare consumers received a surprise medical bill in 2019 Congress recently passed a bill that disallows most surprise medical billing starting in 2022, but that still leaves you vulnerable to them in 2021, and potentially afterwards as well. These bills can be quite expensive, so having money saved up in an HSA can help you cover them.
As if the peace of mind that comes from building up your healthcare savings wasn’t enough, there are tax benefits that come from saving in an HSA as well. You can reduce your taxable income by putting funds into your HSA. There is a yearly maximum contribution limit, so be aware of that when you’re planning your contributions. Beyond reducing your tax liability, the money in the account itself isn’t taxed, and neither is the interest that accrues. Withdrawing the money to cover medical expenses isn’t taxed either.
Saving money in an HSA can be a great option for your family. It helps protect you if you experience a lapse in insurance, are sent a surprise medical bill, and can provide you with tax benefits. If you have trouble setting aside money for healthcare costs, consider setting up an HSA to take advantage of all that it offers.
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