Health Savings Accounts and Self Employed Health Insurance

If you are self employed, you have probably come across the problems associated with buying health insurance. After all, self employed health insurance is not the most cost effective thing in the world today. But even though self employed health insurance is an option that you may want to consider, you can look into ways to better deal with your medical expenses.

What is a Health Savings Account?

A health savings account, or HSA, is an insurance policy designed with small business owners and self employed individuals in mind. Generally speaking, an HSA has a higher deductible than standard self employed health insurance while also offering tax advantages.

The Advantages and Drawbacks

1. With an HAS you will have a high deductible. While this is not a good thing, the other benefits make up for it in the long run.
2. A high deductible means that your premiums will be lower each month. And for most self employed individuals this is a good thing.
3. The money that you save on premium costs can be kept tax free in a health savings account. Then when you are faced with a medical expense you can use the money towards paying your deductible.

The Process

For example, if you are in a bad automobile accident you may incur thousands of dollars worth of medical expenses. Although your deductible is high, the money that you have saved will more than likely cover what you owe. Then when your deductible is met, your insurance company will pay their percentage of expenses.

You can also use the money in your HSA for vision and dental expenses as well as out of pocket costs for filling prescriptions.

For as long as you have your HSA, the money remains tax deferred and can be used towards future medical expenses. If at the end of the year you have some leftovers, there is no reason to worry; it will roll over.