Health Savings Accounts

The Importance Of Health Savings Accounts For Entrepreneurs

Health Savings Accounts (HSAs) are one of the most vital pieces of a well-structured health care plan. In 2003, HSAs were signed into law as part of the Medicare Prescription Drug, Improvement and Modernization Act.

HSAs are a major improvement over the older Health Reimbursement Arrangements, Medical Savings Accounts and Flexible Spending Accounts. In this article, you’ll learn about the importance of HSAs for entrepreneurs.

A Healthy Family

A High-Deductible Health insurance Plan (HDHP) has lower premiums and is beneficial for people who don’t suffer from chronic medical conditions. You must be covered under a HDHP in order to implement a HSA.

Therefore, if you or anyone in your family doesn’t suffer from an expensive medical condition and you’re covered under a HDHP, then you should consider a HSA.

In 2019, an individual who is covered by a HDHP may contribute $3,500, while a family may contribute $7,000. You need to make an additional contribution of $1,000 if one of your family members is 55 or older.


Aside from being a good investment plan for business owners, HSA is also available for anyone who only has cover under HDHP. In other words, you can’t qualify if you’re covered under another type of insurance.

All you need to do is enroll in the HSA-qualifying insurance policy. You can also take advantage of what your employer offers as long as it’s an HSA-qualifying policy. Employers don’t have to contribute to your HSA or set it up for you to access it.

High Income

High income professionals are the best candidates for HSAs because they can afford the discretionary income to contribute to the HSA each year. In addition, they can benefit more from the HDHP because they’re able to cash flow the co-pays and deductibles that come with their healthcare expenses.

They also benefit a lot from making the contributions because of the HSAs’ high marginal tax rates. HSA contributions are not subject to state or federal income taxes.

And, if your employer takes out the contributions out of your paycheck, they won’t be subject to payroll taxes as is the case with Medicare and Social Security.

Tax-Free Withdrawals

HSA withdrawals are tax free as long as you use to pay for your healthcare expenses. Your withdrawals won’t be liable for tax even when paying for Medicare premiums.

The HSA dollars grow in your account and are tax-free because you received a deduction at the time of making the contribution.

While you can use your HSA money to pay for your ongoing healthcare expenses, your account will be more worthwhile if you let it grow and use it for your healthcare expenses a few years from now.

Final Thoughts On Health Savings Accounts

Unfortunately, many investors don’t know that HSAs are one of the best investing accounts they should consider. HSAs are particularly great for high income professionals.

Therefore, instead of the older savings account options that don’t roll over year to year or where the employer owns the savings account, it’s advisable to consider the HSA investment idea.

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