6 Things to Know About Your Health Savings Account

Nearly 20 million Americans are now enrolled in high-deductible health plans via their employer, more than six times the number who had that type of insurance 10 years ago.

And during that time period, the average amount that employees contribute toward their health care costs has more than doubled to nearly $5,000, according to a recent Aon report.

Among large companies, 16 percent offer only a high-deductible plan, and another 41 percent are considering making them the only option in the next few years. Last year alone, an additional 2 million workers joined the ranks of those with high-deductible plans.

While such plans have high costs upfront, they also offer participants access to health savings accounts, which can help defray those added costs and function as a retirement savings tool, as well.

More than 16 million Americans now have health savings accounts, worth a total of over $33 billion last year, according to research firm Devenir. For those who have never had them before, though, HSA accounts can be intimidating. Here’s what you need to know to make the most of your new plan:

1. An HSA is like an FSA on steroids. Just like the flexible spending accounts you may have previously used to cover healthcare expenses, you can have your employer put part of your pretax paycheck automatically into an HSA.  You can then tap into this tax-free account to cover any health expenses like deductibles, co-pays, or dental or vision treatments. That means an automatic savings on health expenses of up to 40 percent, depending on your tax bracket. 

Source: Business Insider, Beth Braverman