How Health Savings Accounts (HSAs) Are Beneficial to Entrepreneurs

In all likelihood you've discovered that individual healthcare insurance is extremely cost-prohibitive for entrepreneurs like yourself. I have good news for you! Affordable healthcare insurance coverage is available without paying exorbitant fees by utilizing a Health Savings Account, otherwise known as an HSA.

A Health Savings Account (HSA) is an insurance policy that was designed with the entrepreneur, small business owner, and self-employed individual in mind. According to an HSA specialist at a major healthcare insurance provider, Health Savings Accounts are high deductible healthcare insurance plans that are linked with a tax-advantaged savings account.

As an example, investing  in an HSA can be compared to purchasing a home while buying an individual healthcare plan is comparable to renting a home. When you purchase a home, you incur higher, up-front costs with the deposit and closing costs. However, with each monthly payment, you build up equity in your home. When you rent, you issue a payment to your landlord every month to pay off his home that you are temporarily living in.

The negative aspect of a Health Savings Account (HSA) is that in order to qualify as an HSA, you must have a high deductible healthcare insurance plan. This is not an appealing feature, but it improves from there. The positive aspects of a Health Savings Account (HSA) outweigh the negatives. First, your high deductible healthcare insurance plan results in significantly lower monthly premiums (particularly crucial in these challenging economic times). Then, the money you save, is kept in a tax-free Health Savings Account, earning interest income. The tax-free money in your Health Savings Account can be used towards your deductible. Additionally, when any sort of medical issue develops, the HSA can be used for other covered medical expenses.

For illustrative purposes, let’s say you’re burdened with tens of thousands of dollars in medical expenses after a car wreck. Although the high deductible with your Health Savings Account (HSA) is three thousand dollars, the money you’ve saved (tax free) in your HSA will in all probability cover it. Once your deductible is met, your healthcare insurance provider assumes payments for its percentage of all your covered expenses. Not all healthcare insurance provider plans are alike, but in most cases, once your deductible is paid, you're covered for the rest of the year. You are even permitted to use the pre-tax money in your Health Savings Account (HSA) towards dental and vision expenses in addition to out-of-pocket costs, such as filling prescriptions. As long as you have money in a Health Savings Account (HSA), it remains tax-deferred and available for any future medical expenses you may encounter. At the end of the year if you have not spent the money remaining in the HSA, it rolls over for the next year's medical expenses. As a matter of fact, the funds can simply sit in the HSA earning interest until needed.

The smart healthcare insurance choice for entrepreneurs, small business owners, and the self-employed is to invest in yourself with a tax-free Health Savings Account (HSA) that earns interest. Don't wash money down the drain on monthly premiums for a lower deductible healthcare insurance plan.

Cindy Thomas is co-publisher of www.healthcare-insurance-providers.info and other information websites.

by Cindy Thomas - February 5, 2011

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