How to Start a Health Savings Account

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Medical Expenses Will Continue to Rise

There is no way around it - medical expenses are always going up and finding the right insurance plan to give one appropriate coverage along with being budget friendly is getting more difficult every year. To help solve this problem many have turned to high deductible health insurance plans.

To Get a Lower Premium the Policy Holder Needs to Take Some of the Financial Burden

High deductible health insurance plans are much more affordable since health insurance coverage does not kick-in until the policyholder has paid a set deductible.

The deductible is set at a higher limit so the policyholder takes more of the financial burden of the health insurance plan. With the insured taking more of the financial burden of the insurance plan by paying more out of their pocket, the insurance company can charge a lower premium.

A Health Savings Account Helps a Policyholder Set Aside Funds

So now that the policyholder has decided to use more of their out-of-pocket money first before their health insurance kicks-in, they could use help in setting aside funds for that deductible. A Health Savings Account usually works out well in solving this.

Health Savings Account Money is Tax Free and Can Earn Interest

A Health Saving Account or HSA supplements one’s current insurance coverage. One’s Health Savings Account will pay for medical expenses that the insurance policy will not pay for such as the high deductible. Besides helping one set aside money to pay for out-of-pocket expenses that their health insurance will not pay for, another benefit of a Health Savings Account is that the policyholder can deposit money in their HSA before paying taxes on it.

In addition, some Health Savings Account plans let the policyholder earn interest on their money when it is sitting in the account.

Go to the Bank to Set up a Health Savings Account

Starting a Health Savings Account is not difficult. A bank is the best place to go to set up a HSA. Before heading out to the bank it is best one brings a few things with them to make sure the bank is able to have all the information needed from the policyholder to properly set up the HSA.

Items needed will include: social security card, photo ID, one’s health insurance policy information and bank account information.

Setting Up a Health Savings Account is Similar to Applying for a Checking Account

Once at the bank the policyholder would simply need to request to set up a Health Savings Account. The bank will probably be able to do most of the process online as one is there in person. Once the bank processes the application the bank will contact the account holder and send them a debit card, routing number and account number. The whole process is similar to setting up a bank account.

The IRS Wants to Know All Activity Related to One’s Health Savings Account

After the process is complete the policyholder is free to start using their Health Savings Account for covered expenses, but there are a couple of things to consider when using one’s Health Savings Account. First, it is important for one to ask the bank how much the IRS will allow them to keep in their HSA. This amount will depend on one’s deductible on their health insurance plan and if they are single or married. Second, although one’s withdraws are tax free, all action on the Health Savings Account needs to be reported to the IRS.

The bank where one set up their Health Savings Account will be able to help the account holder in reporting this information.