What is Health Savings Account?

Recently, my mother was admitted to the hospital for emergency treatment. Initially, I felt relieved as she had health plans for senior citizens covering her hospitalisation. However, the relief turned into worry once I received the claim amount. With a 30% co-pay, exclusions and deductions, what we received was a third of what we had spent. Though it was as per policy terms and conditions, the out-of-pocket expenses seemed quite on the heavier side, with no immediate financial support other than hard-earned taxed savings. 

Over the years, health insurance has been an important savings instrument in the financial portfolio. Be it tax savings or cashless benefits, private health plans have slowly made their place in every person’s necessity list. Even then, less than 30% of India’s population enjoys healthcare benefits, out of which only 8% of the expenses are borne by health insurance providers, and 62% of expenditures are out-of-pocket payments made by the insured as per World Bank Data, 2014. 

Health insurers today focus on institutional treatments and expenses like pre and post-hospitalisations. However, with sub-limits, exclusions and expenses for OPD, the out-of-pocket expenses sometimes go beyond the budget. To find a solution for such expenses, regulators have found the health savings account model to be relevant and affordable.

Keep reading to know more about what is HAS and how does it help in multiply your savings.

What is HSA (Health Savings Account)?

It is a non-taxed unique savings account that a resident of the country can open with any financial institution like banks, or investment firms to deposit funds for medical expenses that are not covered by the health insurers. An HSA account can be coupled with a health plan to cover your entire medical expenditure. 

Currently, in India, some Banks and financial institutions offer a Health Savings account along with insurance coverage without a pre-policy medical examination. The interest rates for these HSA accounts are better than normal savings account rates. HSA accounts also have debit and credit card facilities or ease of transactions.

Health Savings Account Requirements

For opening an HSA account, certain criteria need to be fulfilled: 

• You need to be a permanent resident of India.
• You must be between 21 to 55 years old.
• You need to have a savings account in the bank of your choice, or your employer needs to recommend you for opening a health savings account.

How can I Get a Health Savings Account? 

You need a few documents to get a Health Savings account with a bank: 

• Identity proofs like PAN card, Aadhaar or Passport
• Address proofs like Aadhaar, Driving License or Passport
• A passport-sized photo
• In case the bank requires an initial payment cheque of 25000/-, as in some organisations you might need to keep a minimum balance. 

 How do I set up a Health Savings Account? 

There are two ways by which you can set up an HSA account: 

1. Online Process: You can follow this from the comfort of your home on your laptop. You can go to the concerned bank's website and fill out an online form. Provide communication details like phone numbers and e-mail addresses, and your account will be set up in a few minutes.

2. Offline Process: If you are not tech-savvy, you can also visit any bank branch along with your identity and address proofs and passport photo. You can fill out the form provided by the staff and submit it along with the documents for further processing.

Health Savings Account Eligible Plan

FICCI and KPMG in India conducted a joint study and offered some significant insights into the healthcare industry in India along with some valuable recommendations for all-inclusive solutions for better healthcare.

Currently, in India, only 27% of the population has access to quality healthcare and is covered financially by healthcare instruments. Even this coverage is insufficient as it only provides support during hospitalisation. Outpatient treatments, diagnostics consultation fees, and expenses are often covered out of pocket. With an increase in such expenses and a 14% rise in medical inflation, the need for the hour is a robust product that combines savings and insurance for sustainable healthcare. The report suggested that the HSA scheme, linked to a high deductible health plan, is the ideal model to bring one and all under the ambit of health insurance.

Benefits of Health Savings Account

In short, the benefits of an HSA account are quite alluring:

• Deposits in the HSA account are eligible for tax  benefits. 
• The money withdrawn also is not taxed if it is used for qualified medical expenses.
• In case your family members are claimed on your taxes, you can use the funds of HSA for sponsoring their medical expenses.
• The contribution to the HSA account incurs interest like any other savings account.
• HSA cards are also provided to account holders for comfortable and emergency withdrawals.
• HSA can also be offered by employers or can be opened individually.

Maximising Benefits of Health Savings Account 

To delve deeper into HSA products, you need to understand the basic differences between a health plan and a health savings account. It will bring clarity and will help you decide which is best suited for you and your family’s health requirements.

It is clear from the above details that both HSA and Health insurance products are unique in their own way. Hence, one cannot be a substitute for the other. Therefore, choosing a combination of both is wiser as it will help you cover your end-to-end medical costs without sweating. The expenses not covered under health plans can be met with savings in HSA, and access to quality healthcare in hospitals can be attained via a health plan network. 

Also Read:What should be the hemoglobin level? Know how to increase it?

Conclusion

It is satisfying to see research and surveys going on full swing in Indian healthcare industry to make quality healthcare easily accessible to the public. In order to promote healthier living, better medical amenities, and quality healthcare, the government, insurers, and regulators are coming together to create affordable and suitable health products. A Health Savings account is one such new innovative idea that can become a long-term solution for end-to-end healthcare services in conjunction with a highly deductible health plan. 

Disclaimer: The above information is for reference purposes only. Kindly consult your general physician for verified medical advice. The health insurance benefits are subject to policy terms and conditions. Refer to your policy documents for more information.