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Most of us can relate to facing higher insurance premiums and co-pays with our employer’s health care plan.  For some, it’s become an unaffordable option and more Americans are now without any kind of health insurance for themselves and their families.  It could be a health savings account plan is your best option, says A. Harrison Barnes, founder.  There are many considerations and disadvantages that shouldn’t be dismissed without careful analysis.  Here, Barnes spells out some of those advantages and disadvantages of a health savings account.

First things first – you have to understand what these accounts are and more importantly, what they’re not.  It’s a pre-tax scenario that allows you to contribute a certain amount of your salary to the plan; much like you already do with your 401(k), says the founder.  Also, the annual contribution for those under the age of 55 is $6,150 and most of these plans have a high deductible, too.

You might be surprised to learn the number of Americans who had these particular types of health plans were more than 10 million in January 2010.  For contrast, the number was 8 million in 2009. This is interesting since fewer Americans are insured and yet there continues to be a growth in this particular option.  This very well could become the next norm.

Here’s how it works, says A. Harrison Barnes:

There are qualified medical expenses and these plans often will include prescription coverage and sometimes dental care.   Many employers are encouraging these HSAs because, among other reasons, the streamlined methods used. The employee will pay for a predetermined dollar amount each year and after that’s been met, usually around $3,000, the HSA pays 80% while you pay the remaining 20%.  Each account has its own debit card and checkbook to ensure a streamlined process for paying your medical expenses.  Plus, it makes it easier to keep track of how much you’re spending on medical costs.   Keep in mind, all the money accumulates year after year; meaning, you don’t lose it at the end of the year.  Plus – and this is a big selling point for many – you can opt to stop your contributions for a period of time, sometimes; however, a certain threshold might be required, says Barnes.

Much like you can with a 401(k), any monies you spend out of pocket if your HSA is running low on funds will be repaid to you once you’ve built your balance up again.  As with a 401(k), no one is earning interest off of your money except yourself.

Many are saying this is the new look of the American health insurance plan. More companies are beginning to take notice and have begun making the transition.  If you’re interested in finding out if this is a viable option for your employer, you should meet with your supervisor.

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