Overview of Health Savings Accounts (HSA)

Health Savings accounts are tax-free savings accounts that can be used in conjunction with a High-Deductible Health Plan (HDHP). An HSA is similar to a Medical Savings Account; however MSAs are restricted to employees of small businesses and the self-employed while HSA’s are open to just about anyone with a HDHP.

With an HSA, you save money by purchasing a high-deductible insurance plan with lower premiums. In some cases the insurance premiums are up to 50% less than the typical low-deductible insurance plans. You can use your HSA to get reimbursed for qualified and routine healthcare expenses until you've met the deductible; then your insurance coverage takes over.

Your HSA account is a portable account that you keep with you even if you change jobs, change your medical coverage, become unemployed, move to another state or change your marital status.
An HSA provides you with a tax deduction when you contribute to your account. You also receive tax-free earnings through investment and tax-free withdrawals for qualified medical expenses.
In order to be eligible and contribute to an HSA you must have coverage under an HSA-qualified "high deductible health plan" (HDHP). Generally, this is health insurance that does not cover first dollar medical expenses. Federal Law for 2008 requires that the health insurance deductible be at least $1,100 for single coverage and $2,200 for family coverage. In addition, annual out-of-pocket expenses under the plan (including deductible, copays, and co-insurance) cannot exceed $5,600 for single coverage and $11,200 for family coverage.

The deductible must apply to all medical expenses (including prescriptions) covered by the plan. However, plans can pay for “preventive care” services on a first-dollar basis (with or without a copay). “Preventive care” can include routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, pap smears, etc.

Contributions can be made to your HSA each year that you are eligible. The contributions can be made by you, your employer or both. For the 2008 calendar year you can contribute up to the amount of your HDHP deductible but no more than $2,900 for single coverage and $5,950 for family coverage.

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