YOU ASK:

Can I have a health savings account and regular medical insurance?

WE ANSWER:

A health savings account (HAS) is only applicable if it's used along with HDHPs (High Deductible Health Plans).  Thus, you can't use a health savings with a regular medical insurance policy.

You can also get a separate regular medical insurance policy aside from your health savings account but that is not really a cost-effective solution. For one, you may need to see how your regular medical insurance will coordinate with your high deductible health plan.

Remember, there will only be one health insurance that will pay for any portion of the claim. Getting "double" insurance does not really mean anything. So you should choose either to get a health savings account with an HDHP or to get regular health insurance.

The health savings account may be used to pay for the deductible. It can also "fill up the gaps" of what a high deductible health plan can provide in terms of benefits. The HSA comes in very handy when you want to protect a part of your income in case you are faced with a medical emergency.

Here are some of the distinctions of a health savings account:

  • It's owned by the individual. In contrast, a Health Reimbursement Arrangement (HRA) is owned by the company. HRAs can also be paired with HDHPs.
  • Any funds deposited to your HSA will be tax-free. That means that anything you contribute to the HSA is not included in the computation of your taxes. You may end up belonging to a lower tax bracket in this case.
  • If you don't spend your funds, it will roll over to the next year and accumulate.
  • You can't use your HSA to pay for non-prescription medicines. This is part of the new ruling and will be effective early 2011.
  • If you withdraw from your HSA for non-medical expenses, you will be faced with a higher penalty - 20% instead of the previous 10%.
  • There are limits to just how much of your income you can contribute to your HSA - you can only contribute up to $2,500.
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