Consumers covered by high-deductible health plans, or HDHPs, can avail themselves of health savings accounts, which allow them to save tax-advantaged money for medical expenses. A health savings account, or HSA, can only be used for covered medical-related bills, such as surgeries, eyeglasses, dental treatments, and preventative care.
Why Do You Need a Health Savings Account?
HDHPs provide consumers with coverage for medical treatments, but owners of such insurance plans must pay high deductibles before coverage kicks in. Unfortunately, many families with these type of health insurance plans cannot afford to pay the deductibles out of pocket.
With an HSA, families can save money toward future medical expenses without having to pay taxes on that money. The IRS imposes contribution limits on these accounts.
HSAs have grown in popularity since they first debuted in 2003. From 2005 until 2012, for example, the amount of money invested in health savings accounts grew from $1 million to $13.5 million, according to AHIP.
If you're having trouble with medical bills and other expenses, sign up for Mint to gain more control over your finances.
Can You Use HSAs for Non-Medical Expenses?
The monies contributed to HSAs are intended for medical expenses, and their use for non-medical expenses is governed by individual financial institutions. Some allow account holders to make emergency withdrawals, but only under certain conditions. Additionally, the money must be paid back.
An HSA is similar to an IRA or other retirement plan. The money is invested to generate revenue for the financial institution. When money is withdrawn for a non-medical purpose, those funds are taxed just like income.
It becomes easier to manage your health savings accounts and other financial instruments when you sign up for Mint.