Health Savings Accounts give the entrepreneur more control over health decisions and controlling costs of health care. Choosing this health alternative may be the only way for some entrepreneurs to afford coverage.
Basics of a Health Savings Account
Entrepreneurs take the first step towards a Health Savings Account by securing a catastrophic insurance policy, also known as a high deductible insurance policy. This policy will cover any major health events that might happen but will not cover day to day health care expenses. A catastrophic policy resembles the type of insurance that might be taken out on a house or car – it covers major issues but the day to day care will come out of pocket.
After the catastrophic policy takes effect, the entrepreneur will be allowed to begin putting money into a Health Savings Account. These deposits will be tax deferred (meaning that no taxes will be taken out of the money) and can be used for covering those day to day health expenses like doctor visits, prescriptions and even over the counter medications in many instances.
Money that remains in the account after the federal retirement age can then be accessed for any reason with no tax penalties. The Health Savings Account works similarly to a retirement account in this area.
Once the Health Savings Account has been established, the money in the account can be used to pay the premium for the catastrophic policy.
Benefits of Health Savings Account
The premiums of the catastrophic health insurance policy associated with a Health Savings Account will be drastically lower than premiums associated with a traditional health insurance policy.
Entrepreneurs that invest in Health Savings Accounts determine the amount that will be placed in the account. The government does restrict the top amounts, but entrepreneurs can choose to invest any amount below the restrictions in a given year.
There will be no waiting for approval from the insurance company. The money invested in the Health Savings Account can be used for medical needs without having to wade through red tape.
The entrepreneur will have the ability to choose a doctor instead of having an insurance company determine which doctors or clinics can be visited.
Health Savings Account Changes
The recent health care bill that was signed into law may not have any effect on the use of Health Savings Accounts. The current statues do not limit or deny Health Savings Accounts to the entrepreneur.
Industry experts say that any effect to Health Savings Accounts will only be uncovered after the final regulations have been written and implemented. Entrepreneurs should always work with a financial professional or advisor before choosing to move towards new investment and insurance choices. The experts in the industry should be aware of any changes to the requirements or benefits of Health Savings Accounts.
Health Savings Accounts can be a financially friendly alternative to traditional health insurance for entrepreneurs willing to invest the time and the energy to utilize the benefits.