How Health Savings Accounts Work

Republicans’ plans to repeal and replace  the Affordable Care Act are not yet final, but many of the ideas circulating in Washington share a common feature: the expansion of spending savings accounts. health towards more consumers.

A  Health Savings Account , or HSA, is a tax-exempt account available to people who have certain  high-deductible health plans  to help pay for out-of-pocket medical expenses. Today, to open an HSA, your annual deductible must be at least $ 1,300 individually or $ 2,600 for families, but the deductibles for those plans can be, and generally are, higher than this.

HSAs are different from Flexible Spending Accounts [ FSA], although they have similarities. FSAs, which must be opened by the employer, allow the person to set aside up to $ 2,550 before taxes to pay for health care expenses. You cannot contribute to an HSA and an FSA at the same time.

There are currently 20 million active HSA accounts in the United States, but expansion plans may increase this number considerably.

House Speaker Paul Ryan  recently said that legislation   to repeal and replace the Affordable Care Act will come up in the House when Congress returns from its recess on February 27. A leaked version of that plan   was posted on Politico on Friday and would allow people to contribute more to an HSA than current law allows.

Another plan introduced by Senator Rand Paul in January would allow people with any type of health insurance, regardless of the amount of the deductible, to open an HSA.

Not everyone thinks expanding access to HSAs is a good idea.

“HSA expansion proposals disproportionately benefit wealthy Americans by offering them tax cuts,” says Maura Calsyn, managing director of health policy at the Center for American Progress, a nonpartisan policy institute. “But they do nothing to increase coverage for the poorest people who don’t have extra money to save.”

Since HSAs require consumers to have extra income to deposit into the account, they are of little use to those already struggling to pay for their health insurance in the first place. Meanwhile, the wealthiest people who can hoard money in an HSA could have a huge tax benefit. And HSAs also rely on consumers to be able to accurately predict their annual medical expenses.

“To ensure that consumers can get the health care they need and when they need it, global solutions must be in place,” says Laura MacCleery, Vice President of Consumer Policy and Mobilization at Consumers Union, the policy and action arm of Consumer Reports. . “HSAs transfer risk to consumers who have to pay for health care that should normally be covered by insurance, and it meets the needs of a select few, while not providing the ability to reduce costs for all providing the security of a wide coverage for all “.

However, one thinks of HSAs as a matter of national policy and you may find yourself considering having one in the near future. Or maybe you already have an HSA and are wondering if you may have a better option. Here’s what you need to know to find an HSA that meets your needs.

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