What is a Health Savings Account (HSA) and how does it relate to group health insurance?
- Author :
- TATA AIG Team
- ●
- Last Updated On :
- 16/10/2024
Being financially prepared to face medical emergencies is essential and there are many ways to do so. Some popular ways are through health insurance plans or an HSA; full form health savings account.
We all know the purpose of health insurance, but HSAs may be new to you. So, let's introduce you to a new way of making provisions for medical contingencies that will not affect the regular pace of your savings, even if you have to undergo an expensive medical treatment.
What is a Health Savings Account?
A health savings account is a type of personal savings account that encourages the account holder to save money for unforeseen expenses arising from any health issue, such as huge treatment costs.
Contributions to a health savings account can either be made by the account holder or their employer (in the case of employer-sponsored plans). These funds can be withdrawn using an HSA card. In addition to these two parties, the account holder's family members are also allowed to contribute to the HSA.
These accounts tend to offer higher interest rates compared to personal savings accounts. Some of these accounts also offer smart investment options for better returns and pre-approval credit lines for medical emergencies.
Examples of Qualified Expenses for a Health Savings Account
| Category | Examples |
|---|---|
| Medical | Birth control, Acupuncture, Acid controllers, Drug addiction treatment, Digestive aids, Flu shots, Menstrual care products, Speech therapy, Respiratory treatments, Psychiatric care, Vasectomy, Laxatives, Motion sickness, Hospital services, etc. |
| Dental | Teeth cleaning, Braces, Dentures, Tooth filling, X-rays, Extractions, etc. |
| Vision Care | Contact lenses, Laser eye surgery, Glasses, etc. |
HSA Banks: Which Banks Let You Open A Health Savings Account in India?
It should be noted that HSAs are still a relatively new concept in India and are only offered by some banks. For this reason, only a few organisations provide the service of opening a health savings account:
IDFC First Bank offers interest at a rate of around 5% and the option of getting health cover of up to ₹10 lakhs. The minimum balance requirement for maintaining health savings account status will range between ₹24,000 and ₹26,000.
FEDO, a start-up in Bangalore, provides excellent returns on your savings and a pre-approved line of credit for health emergencies to those who have an excellent FEDO score.
Who Can Open a Health Savings Account?
In general, anyone can open a healthcare savings account, be it an individual or an employer offering it to his employees. Although, some banks only offer them to Indian permanent residents or citizens who are 21 - 55 years of age.
A health savings account helps the policyholder withdraw sufficient funds to pay medical expenses. It should be noted that in India HSA reporting to tax authorities is not required as HSA accounts do not have any special tax provisions or deductions as of yet.
Benefits of a Health Savings Account?
No Expiry
The best part about having a health savings account is that it will not expire. This account stays with you even if you switch to another company or retire. The funds in your health savings account will always be available to you and help you cover the health care expenses.
In cases of death, the beneficiary added to the HSA bank documents will be eligible to transfer the account benefits to their account.
Flexibility in Withdrawals
There are no restrictions to the number of withdrawals as long as you take money out for qualified medical expenses from your health savings account. This flexibility in withdrawals will help you meet your short-term as well as long-term needs easily.
Higher Interest
Most HSA accounts provide higher interest rates compared to regular savings accounts. This helps you make the most out of your savings.
Some banks also offer smart investment options for better returns to help boost your savings. However, it is essential to note that the rate of interest varies from bank to bank.
Post-Retirement Benefits
You can withdraw the remaining funds from your health savings account when you retire. This withdrawal can be made even if there is no medical emergency.
This feature of a health savings account is considered to be the best among all, as it indirectly helps the account holder save money for his retirement without feeling any burden and gives him additional peace of mind.
Greater Control
Having a health savings account ensures two-way control over your budget. First, it encourages you to save money for unexpected health-related expenses. Second, it puts you in charge of the withdrawals to be made.
A health savings account allows you to manage your money more efficiently by allowing you to decide when to spend and when to save.
Option to Carry Forward
If you do not get the chance to make any withdrawal from your HSA savings account in a year; your remaining funds will stay with you. Thanks to this feature of a health savings account, you can carry forward your current year fund balance to the next financial year without worry.
Long-Term Savings
As your health savings account balance rolls over year to year, it will motivate you to invest more and more in your account. Eventually, your health savings account will have a substantial corpus that will help you cover the qualified expenses resulting from medical emergencies or general health problems.
Documents Required for Opening A Health Savings Account
PAN (Permanent Account Number) Card
Aadhar Card
Passport-sized photograph
Proof of residence
Duly filled (health savings) account application form
How to Open A Health Savings Account?
Offline
Gather all the necessary documents for opening a health savings account.
Choose an HSA bank according to your convenience and visit its nearest branch.
Ask for an account opening form from a bank official.
Once provided, fill out the form with the correct details.
Submit the form, complete the formalities and within a few days your health savings account will be opened.
Online
Select a reliable organisation that provides an HSA account and search for its website on Google.
Open the website, navigate through it and go to the "form" section.
Open the link to the health savings account form, fill it out with the details asked, upload the required documents, and provide your email address as it is mandatory to have an active email account for contact purposes.
Submit the form and the account opening process will be initiated.
What is the Link between a Health Savings Account and Group Medical Insurance Policies?
Group health insurance is a type of business insurance in India that is offered by employers to their employees to provide health insurance coverage. An HSA is more of a type of bank account that you can opt for or can even be offered by the employer as well.
The relation between health savings accounts is that both these work towards financially securing you against medical emergencies as and when they arise.
An HSA account can be beneficial if used in conjunction with a group health insurance plan, as it provides financial help for medical expenses that may not be covered by the insurance plan. The result? Complete financial protection against unforeseen medical emergencies.
Conclusion
A health savings account is a new yet fantastic investment opportunity for those who want extra financial coverage for unpredicted events caused due to medical issues. With a health savings account, you can save money for the long term and earn interest on it. It will also give you better control over your expenditures and savings.
To make the most out of it, it can be combined with a group medical insurance policy offered by insurers like Tata AIG to offer employees all-around medical coverage. This approach can benefit both employers and employees.
FAQs
Can you add money to HSA at any time?
Yes, you can make contributions to your health savings account at any time, but you should confirm this when opening the account to avoid misunderstandings.
Can two people use the same HSA?
No. A health savings account only covers one person at a time. If someone in your family wants to enjoy the financial benefits of a health savings account, a new health savings account has to be opened for them.
Is HSA a bank?
No. HSA is the abbreviation for health savings account. An HSA is a savings account which is opened to save money for medical emergencies.
Can you close an HSA account?
Yes, a health savings account can be closed at your request. However, all dues need to be cleared before the account can be closed.
How to use an HSA card?
An HSA card can be used like a regular debit card.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.
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