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Financial Fitness: Control Health Insurance Costs with a Health Savings Account (HSA)

By James F. Brown, Jr.
President & CEO

Rising health care costs are causing a strain on the pocketbooks of Americans. The price of health insurance has increased every year over the last five years, making it more and more difficult for businesses to make ends meet while offering employees good benefits. Uncle Sam has realized the problem, and there is some help available in the form of saving tax dollars for payment of medical expenses.

Many businesses and individuals are replacing traditional coverage with a high-deductible health plan (HDHP), also referred to as "catastrophic" health insurance. As the name indicates the deductible is higher with these plans, however, the good news is that the premium is lower.

Once you have established your HDHP, then you are eligible to supplement your high deductible by opening a Health Savings Account (HSA). You utilize your HSA by making tax-deductible contributions to the account, and withdrawing money tax-free throughout the year to pay qualified medical expenses until your deductible is met.

And as an added bonus, the money that you don't use can be rolled over from year to year and continue to earn tax-free interest. Unlike a flexible spending account (FSA), you don't lose unused funds. The HSA helps you save for future expenses and for those you may need to pay after you retire.

The best thing about the HSA is that you own it. Therefore, you have the freedom to make spending decisions regarding your medical care and do not rely on a third party or insurance company for these things. You also decide what investments to make with the money, therefore contributing to its growth.

Any adult can open and contribute to an HSA if they have coverage under an HDHP, have no other medical coverage, are not enrolled in Medicare and cannot be claimed as a dependent on someone else's tax return. Not only can individuals contribute to their HSA, but many employers are also contributing directly to an employee's HSA as part of their benefits package. By doing this, they receive a tax deduction for the amount of any contributions they make. 

The HSA helps people with HDHPs pay for health costs that might accrue before insurance kicks in. There is a limit to the amount of money that can be put into the HSA each year, but any funds that roll to the next year remain tax-free.

Texas Gulf Bank offers the HSA Super Now for individuals currently enrolled in an HDHP. This account has a low opening balance requirement, a low or in some cases no maintenance fee, and offer competitive interest rates. It is easy to pay qualified expenses from this account, as you are provided check writing and debit card privileges.

HSAs have become a valuable tool in combating rising healthcare costs, helping businesses provide coverage to their employees and saving tax dollars. Consult your tax advisor for how a HSA might benefit you, depending on your particular situation. Take the time to learn how opening an HSA can help you offset the costs associated with your high deductible.

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