Note, investing in stocks and other securities within your HSA carries potential loss and is not recommended for everyone. Investing in stocks carries the risk of loss of principal, and should only be considered as part of a diversified, long-term wealth-building strategy. It would be wise to seek the advice of a financial planning professional before taking such actions. Any interest or other earnings on the money in the account is tax-free.
Most HSA accounts earn a minimal amount of interest, less than 0. If you have money left in your HSA at the end of the year, it rolls over to the next year.
The money in your HSA remains available for future qualified medical expenses even if you change health insurance plans, go to work for a different employer, or retire. Essentially, your HSA is a bank account in your name, where you decide how and when to use the funds. HDHPs are required to set a minimum deductible and a maximum for out-of-pocket costs. Most HSAs issue a debit card, so you can pay for prescription medications and other eligible expenses right away.
If you wait for a medical bill to come in the mail, you can call the billing center and make a payment over the phone using your HSA debit card.
You can alternatively reimburse yourself out of an HSA if you have paid a medical bill with an alternative form of payment. If you qualify for an HSA, here are some of the disadvantages to consider:. A High-Deductible Health Plan, which you are required to have to qualify for an HSA, can put a greater financial burden on you than other types of health insurance.
Even though you will pay less in premiums each month, it could be difficult—even with money in an HSA—to come up with the cash to meet the deductible for a costly medical procedure. This is something to consider for anyone who knows they will have hefty medical bills in a particular plan year.
The deductibles for HDHPs are often significantly higher than the minimums required and can be as high as the maximum out-of-pocket costs allowed. Some people may be reluctant to seek healthcare when they need it because they don't want to spend the money in their HSA account. After age 65, you'll owe taxes but not the penalty.
You must keep receipts to prove that your withdrawals were used for qualified health expenses. This will be necessary if you are audited by the IRS. Some HSAs charge a monthly maintenance fee or a per-transaction fee, which varies by institution. While typically not very high, the fees are almost certainly higher than any interest the account may earn and do cut into your bottom line. What you do not spend, you carry over to the next year. If you leave Discovery Health Medical Scheme, we are legally required to pay the balance to the new medical scheme you join.
If that information is not available or you choose a plan without a medical savings account, then we pay you whatever you have contributed that is more than you have claimed, after four months. However, if you have spent more than what you have contributed, you will owe us the extra amount. Please note: The payment arrangement we have with healthcare professionals will make sure we pay them according to the agreed rate.
Copyright Discovery Ltd is the licensed controlling company of the designated Discovery Insurance Group. Companies in the Group are licensed insurers and authorised financial services providers.
Please click here to login into Discovery Digital Id. Log out to start a new session or go to the home page. Log in to start a new session or go to the home page. Back to old site. Welcome to our new site. Got it. Already a member? Log in Online Banking Register. Medical aid. Gap Cover. She notes that the ability to spread the risk as broadly as possible is essential to maintaining reasonable health insurance premiums.
If a substantial number of low-risk individuals leave the pool, the remaining higher-risk individuals will have to pay more. Although the limited number of MSAs sold during the HIPAA pilot project makes it impossible to analyze the actual impact on premiums for those who choose traditional comprehensive insurance coverage, 48 Shearer attempts to predict what the average total health care costs would be for various risk pools if a certain percentage of the average healthy and sick opt for MSAs.
The Urban Institute also examined the effects of risk segmentation on premiums. Finally, if allwho would gain by moving to MSAs did so, the premium for the comprehensive plan would rise by over four times.
MSAs will appeal to those who are already insured rather than to the uninsured. Opponents of MSAs contend that MSAs will be attractive to those who already have insurance and who want to attempt to reduce their health insurance costs. Those who are uninsured are not likely to have the financial ability to purchase an MSA in the first place. MSAs will provide a tax benefit for the wealthy. Because contributions to an MSA account are tax deductible, those who have higher incomes and thus fall into a higher tax bracket will reap a greater benefit from contributing to an MSA than those with lower incomes.
MSAs will not have a significant impact on health care spending. Some wasteful spending will likely be discouraged, but such expenses do not represent a high portion of total medical expenses. A considerable amount has been written about the impact of MSAs on health care costs and spending.
It is important to note, however, that there is not a great deal of practical experience from which to draw; most of the studies are based on data simulations and there would appear to be no real consensus in the economic literature on the overall impact of MSAs on health care costs.
An in-depth report on medical savings accounts published by The Fraser Institute 51 notes that studies of employer-sponsored MSAs in the United States indicate that savings can be generated. The report discusses three examples. Another study of companies providing MSA plans found that the companies had achieved significant cost decreases and had highly satisfied employees.
Other research has attempted to examine the impact of medical savings accounts on health care expenditures. The results of this research were reported in studies prepared for the National Coalition on Health Care 55 and The Fraser Institute 56 as well as in a C.
If people could choose from several types of plans, the simulation indicates that adding options to MSAs would produce fewer savings because those most likely to use medical services would tend to pick more comprehensive plans with higher levels of financial protection. Another study of non-elderly adults compared comprehensive insurance and a combination of medical savings with catastrophic insurance. However, another study indicates that for the elderly Medicare population in the United States, this approach would be less appealing, thereby reducing potential overall savings.
The C. Howe Institute Commentary suggests that evidence from other countries does not clarify unresolved issues from the U.
One study points out that hospitals in Singapore did not start competing on price, and that the per capita cost of health care rose faster after the introduction of medical savings accounts than it had before. There is evidence that patients will use fewer health services when they have to pay more out of their own pockets for the services. But there would appear to be no consensus about the effect of higher cost-sharing on all health care spending.
A study prepared for the Urban Institute noted that. Some advocates of MSAs have assumed rather large effects, whereas the professional economic literature suggests modest responsiveness to cost-sharing when compared with the price sensitivity of other goods.
The effect of increased cost-sharing is not likely to be uniform across different services and may differ for different population groups as well.
For example, low income groups are particularly sensitive to cost-sharing, likely because of the relative burdens of such costs as compared with their resources. Indeed, one of the reasons why MSAs are thought to be so popular with higher income families is that the deductibles usually associated with such plans are not likely to be very constraining on behavior.
Commentators also point out that MSAs may have little impact on containing health care costs because very ill people whose expenses would exceed the deductible level account for such a large portion of health care spending.
Once that coverage begins to pay, the person insured with an MSA has no more nor less incentive to economize than does the person covered by a plan that has front-end coverage.
The Urban Institute study suggests that a shift to MSAs might produce a one-time reduction in health care spending that would lower the spending base but would not necessarily reduce the expenditure growth rate.
And it is the growth in spending that most concerns analysts regarding health care costs. That is, the shift in type of policy could result in a one time reduction in the base, but after that, the causes of growth in costs could largely be unaffected. Thus, high priced procedures and techniques may actually face less market discipline if we move to an open-ended fee-for-service policy that fully protects families above the deductible as compared with pressures on technology in a managed care context.
The effect of MSAs on health is another contentious issue. Proponents argue that MSAs will not have a negative effect on health; indeed, MSAs will encourage people to take greater responsibility for their personal health and reduce consumption of unnecessary health care services.
MSA opponents, on the other hand, maintain that when expenses have to be paid from MSAs or out-of-pocket, people may forego necessary and preventive care and ultimately cost the health care system more when they require treatment for a serious medical problem.
Unfortunately, there is little direct evidence on this question. However, because cost-sharing for health care expenditures is inherent in the MSA concept, studies have looked at the impact of cost-sharing on health outcomes and preventive care and have sought to apply those results in the context of MSAs.
The results of a number of these studies are discussed in The Fraser Institute report which noted that although cost-sharing does not necessarily translate into a decline in overall health, it does have an adverse impact on the poor. Cost-sharing reduces both necessary and unnecessary care; however, the type of cost-sharing plan was found to have no effect on most measures of health.
There is a slight decrease in the consumption of preventive care when cost-sharing increases. Various proposals for medical savings accounts have been put forward in Canada.
Each of these proposals is described below. In , The Fraser Institute proposed a system of medical savings accounts in the context of the Canadian health care system. The Medical Premium Account was said to have the following benefits:. The MPA concept would create a more efficient and a more effective method of providing publicly funded universal insurance.
An MPA would be truly portable, as the funds belong to the individual. It would be truly comprehensive, as the funds could be used to purchase any health services the individual desired, thus offering greater consumer choice.
It would inform the consumer and the supplier of the true costs of health care and it would provide them both with incentives to use the system appropriately. As well, an MPA would ensure that the health provider was the agent of the patient, not the agent of the state or a specific institution.
The doctor-patient relationship, which has been eroded over the years by government regulations and cost cutting measures, would be restored. The government would provide every citizen with an MPA. The account would be used to purchase private insurance to cover catastrophic illness and to pay for health care services and routine medical bills.
Any medical service could be funded from the MPA, but only covered services would count towards the deductible. The individual would be required to use the money in the MPA, or his or her own funds, to pay for medical expenses until the deductible was reached and the insurance coverage applied. The account would belong to the individual and any funds left over at the end of the year would continue to belong to the account holder.
Where they have been adopted, MSAs have resulted in lower employer and employee costs, accumulated savings, and high degrees of employer and employee satisfaction. One would predict an even larger decrease in health expenditures had these simulations been performed using Canadian data because Americans already face financial incentives with respect to their use of health care while Canadians do not for the most part. Medical savings accounts can encourage more prudent use of the health care system and introduce competition into the medical market-place without creating financial barriers to care.
MSAs provide incentives for consumers to take a more active role in their consumption of medical care services and in their overall health status.
The most promising characteristic of MSAs in a Canadian context is that individuals will be able to purchase medical services with money they can otherwise keep because any funds remaining in the account at the end of the year are the property of the individual.
In effect, MSAs can indirectly establish a cost-sharing device without infringing on the important philosophical cornerstones on which the Canadian health care system is built: universality, accessibility, portability and comprehensiveness. Recognizing that MSAs are controversial and that their impact in the Canadian context is uncertain, Ramsay called for the creation of an MSA pilot experiment in one region of Canada to provide data on issues of concern with respect to MSAs, including the following: How will MSAs influence the consumption of health care services?
Will the use of necessary services decrease by more or less than unnecessary services? Will the change, if there is a change, in health care consumption differ across income groups? Will physicians induce demand if MSAs decrease consumption? The Frontier Centre for Public Policy These elements are:. As a result, demand increases and there is over-consumption and waste. Under the Owens and Holle proposal for Universal Medical Savings Accounts, each citizen would have a UMSA into which would be deposited an amount equal to the average amount governments now spend per capita on health care.
The UMSA would be a combination of catastrophic insurance and an account, and would operate this way:. Each account-holder would gain access to those funds through an electronic debit card. In the case of dependent children or people who are incapacitated and unable to manage their resources, parents or public or private trustees would be responsible for administering the UMSA.
Withdrawals from the account would be allowed only to pay for health-care services. Individuals would cover themselves against catastrophic events by purchasing insurance from competing commercial carriers, co-operatives or mutual benefit associations. The cost of catastrophic insurance would depend on the age of the person and the size of the deductible. The two are usually paired together. The annual limits on contributions apply to the total dollars contributed by both the employer and the employee.
Qualified people who buy their insurance on their own can open an HSA at certain financial institutions. Contributions by those who receive employer-sponsored health insurance pay for their HSAs through payroll deductions.
Any other person, such as a family member, can also contribute to the HSA of an eligible individual. Self-employed or unemployed individuals may contribute to an HSA if they meet the eligibility requirements. Individuals who enroll in Medicare can no longer contribute to an HSA as of the first month of enrollment. But they can receive tax-free distributions for qualified medical expenses. HDHPs have higher annual deductibles but lower premiums than other health plans. That is, the monthly costs are lower but the people covered are responsible for their own medical costs up to a set amount.
The financial benefit of an HDHP's low-premium and high deductible structure depends on your personal situation. The plan must also have an annual out-of-pocket maximum , which caps your out-of-pocket medical expenses. When an individual pays qualified medical expenses equal to a plan's deductible amount, additional qualified expenses are divided between the individual and the plan.
Once the annual deductible is met in a given plan year, any additional medical expenses are typically covered by the plan with the exception of any uncovered costs under the contract, such as co-pays. An insured can withdraw money accumulated in an HSA to cover these out-of-pocket expenses.
On Sept. Health Savings Accounts have a number of advantages as well as drawbacks. The effect of these accounts depends on your personal and financial situation. Earnings in the account also are tax-free. Distributions from an HSA are tax-free provided the funds are used for qualified medical expenses as outlined by the IRS. You can use the money in your HSA to invest in stocks and other securities, potentially allowing for higher returns over time.
An obvious drawback is the limits on eligibility. You must have a high-deductible plan and lower insurance premiums, or you're affluent enough to afford the high deductible and still benefit from the tax advantages.
Individuals with little spare cash to set aside may find this burdensome. HSAs also come with filing requirements regarding contributions, specific rules on withdrawals, distribution reporting, and a record-keeping burden that can be burdensome to maintain.
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