In 2003, President Bush signed a Medicare bill that created Health Savings Accounts (HSAs), which were created so individuals can save for future qualified medical and retiree health expenses on a tax-free basis. The following information was compiled from information found on the U.S. Department of Treasury’s Health Savings Account Frequently Asked Questions website.
What is a Health Savings Account?
A Health Savings Account gives people an alternative to traditional health insurance, it offers a different way  to pay for health care. With HSAs you can pay for current health expenses and put away money, tax-free, for future qualified medical and retiree health expenses.
You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can be put into a Health Savings Account.
You own and you control the money in your HSA. Decisions on how to spend the money are made by  you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.
What Is a “High Deductible Health Plan” (HDHP)?
You must have an HDHP if you want to open an HSA. Sometimes referred to as a “catastrophic” health insurance plan, an HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses  (i.e., your “deductible”) but will generally cover you after that .  Of course, your HSA is available to help you pay for the expenses your plan does not cover.
HDHPs can have first dollar coverage (no deductible) for preventive care and apply higher out-of-pocket limits (and co pays & coinsurance) for non-network services.
How can I get a Health Savings Account?
Consumers can sign up for HSAs with banks, credit unions, insurance companies and other approved companies. Your employer may also set up a plan for employees as well.
How much does an HSA cost?
An HSA is not something you purchase; it’s a savings account into which you can deposit money on a tax-preferred basis.  The only product you purchase with an HSA is a High Deductible Health Plan, an inexpensive plan that will cover you should your medical expenses exceed the funds you have in your HSA.
How does it work?
Each year, you can contribute money into a health savings account, subject to a maximum annual contribution. An eligible individual and his or her eligible covered dependents can use the money in the health savings account to pay for qualified medical expenses, tax-advantaged, as defined in IRS rules. Any money remaining at the end of the year rolls over to the next year.
For more information on HSAs, visit the U.S. Department of Treasury’s HSA website at or call (202) 622-2960.

By Herschel Macy, HM Insurance, Springfield, Mo.


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