Health Savings Account (HSA)

The most important tool in recent history to help the ever increasing costs in health insurance premiums and overall money spent on health care for the average family is the Health Savings Account (HSA). This new feature provides virtually open access to working Americans, which allows consumers to pay for qualified medical expenses with pre-tax dollars (This means INCOME TAX FREE!) and save for retirement on a tax-deferred basis.

What are Health Savings Accounts?

Health Savings Accounts, or HSAs, is a separate savings account that you own to save for qualified medical expenses. The money contributed to the account is pre-tax dollars (similar to an IRA). When the funds are used for qualified medical expenses, the money has no income tax taken out. To qualify for the HSA, it must be combined with a high-deductible health insurance plan (HDHP).

• Pre-tax money is deposited each year into an HSA and can be easily withdrawn by check or debit card at any time with no penalty or taxes to pay routine medical bills and other qualified expenses. Withdrawals can also be made for non-medical purposes, but will be taxed as normal income and are subject to a 10 percent penalty if done prior to age 65.
• Any HSA funds not used rollover from year to year, and any interest earned is tax-free.
• This account belongs to you, not your employer. Plus, your employer can contribute to your HSA.

Who is eligible and how does it work?

Anyone is eligible for a HSA that is under the age of 65 and has a qualified health insurance plan:

• For individuals, a qualified health insurance plan is one with a minimum deductible of $1,100 and a $5500 total cap on out-of-pocket expenses (in 2008.)
• For families, a qualified health insurance plan is one with a minimum deductible of $2,200 and a $11,000 total cap on out-of-pocket expenses (in 2008.)
• Minimum deductible can increase annually determined by Congress.

Once you have a HSA-qualified health insurance plan, and have opened a Health Savings Account, you can make yearly pre-tax contributions up to the lesser of 100 percent of your health plan's out of pocket expense or the annual cap. (Contributions cannot exceed $2,900 for singles or $5,800 for families in 2008.) If you are between the ages of 55 and 65, you can make an additional annual "catch up" contribution (of up to $900 in 2008.)

What are qualified medical expenses?

Use funds from your Health Savings Account to pay for:

• Deductibles
• Office Visits
• Dental, Vision & Chiropractic care
• Prescription drugs
• Medically-related transportation and lodging
• Long-term care services and insurance premiums
• Health insurance premiums if you are receiving federal or state unemployment benefits
• Premiums under COBRA-qualified plans

Why should I get an HSA?

• Lower your taxable income when you invest in your HSA with pre-tax dollars.
• Earn tax-free interest on the money you save in your HSA.
• Save on premiums by having a higher-deductible health insurance plan.
• Money typically lost in income tax can be used for healthcare expenses.

Where can I get an HSA?

Go to the top of the page for a quote on a qualifed Health Savings Account plan now. Just click on "See our rates now".

To get an HSA account, visit HSA Bank.