NEW YORK (MainStreet) While only 8% of Americans have a Health Savings Account (HSA), however 50% say they are somewhat or very likely to use an HSA to lower their taxes, according to a new insuranceQuotes.com report.
Americans with high-deductible health insurance plans can allocate money into HSAs to cover certain medical expenses. Their contributions are not subject to federal income taxes and can be invested like an IRA.
The advantage of HSAs is that the unused funds roll over each year and any remaining money can be used for retirement after the age of 65, said Laura Adams, insuranceQuotes.com's senior analyst.
Many consumers are confused about HSA eligibility and benefits. Only 14% of Americans know that an HSA needs to be paired with a high-deductible health insurance plan. People who buy coverage on the public health insurance exchanges are especially good candidates, since most of the purchased plans (including silver and bronze plans under Obamacare) are high deductible plans.
A high deductible is defined as at least $1,250 for an individual and at least $2,500 for a family. InsuranceQuotes.com found that only 16% of Americans who know that a high-deductible plan is required for an HSA correctly pegged this amount.
Consumers remain confused about which medical expenses HSAs can be used for with 52% incorrectly believing that they can use HSAs to pay for over-the-counter medications and 51% falsely believe they can use HSAs to pay for health insurance premiums.
Popular expenses that HSAs can be used for include prescription medications, doctor visits, dentist visits and eyeglasses. HSAs can also pay for continuing coverage such as COBRA and long-term care insurance.
"With the advent of Obamacare, more Americans are eligible for a Health Savings Account than ever before," she said. "You fund it ahead of time which means you will get a discount for any medical procedures you need in the future. It can add up to some substantial savings."