Health Savings Accounts

Monday November 23, 2009

Savings accounts are designed for a variety of purposes from home renovations to holidays to education with there being a range of savings options and rates available to suit individual savings styles. Within the savings accounts industry there is a unique type of fund, namely the Health Savings Account.

Health savings accounts are a way for individuals to prepare for any unexpected health costs, presenting an opportunity for people to contribute pre-tax money to pay for medical expenses. Essentially these health savings accounts are contributions that can possibly be made into an account by either an employer or the employee and are excluded from income tax, with conditions attached.

People can contribute to the costs of their health care easily through their taxes, through their private health insurance premiums and also from out-of-pocket contributions or "gap" payments.

The Australian health system is one of the best in the world with a high quality health system that is available to most people at relatively low cost. However, there are several issues that are beginning to occur within the Australian population that is predicted to start having a major effect on individuals' healthcare.

Essentially, both the public and private health insurance systems will soon be dealing with a significantly aging population that will require more access to new health technologies.

The Australian Medical Association has released several statements in regards to health savings accounts, stating that they believe health savings accounts can compliment the existing health insurance system.

"Health Savings Accounts are not an insurance product and could not replace health insurance.

"The rationale for Government support of Health Savings Accounts is essentially the same as that for support for superannuation savings - helping to achieve intergenerational equity while helping people to provide for their needs in old age." The Australian Medical Association stated.

The benefits of health savings accounts are multiple with some of the most notable being that it should be sustainable in the longer term which is ideal for the aging population, along with the Australian medical Association pointing out that better health savings accounts will make government financial resources more available to assist those health needs of disadvantaged patients.

The principle functions of prospective Health Savings Accounts can be generally sorted into two main functions, they are:

• the accumulation and the management of funds
  
• the application of balances to the payment of claims. Consumers would be able to opt for their Health savings accounts to be managed by their superannuation fund or even by their private health insurance fund.

"With an ageing population and a shrinking pool of employed persons (relatively, and perhaps absolutely) contributing the bulk of income taxes, it will become ever more difficult for governments to fund the needs of older persons for shelter, retirement income and health care from tax revenues (and the increasing resort to intergenerational transfers that implies)" said the Australian Medical Association.

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