Health
Savings Account
(HSA)
What is an HSA?
An HSA isa tax-relief option created throuogh the Medicare
Modernization Act enacted by Congress in 2003. It is a personal
account in which you can place tax-deferred money. The funds
are owned and controlled by you. You may use your HSA to
help pay qualified first-dollar expenses not covered by
your health insurance plan.
How Does It Work?
Typically, an indivdual or family purchases a qualified
high-deductible health insurance plan, the guidelines being
set forth by Congress. The deductible is funded with the
separate account, which is tax-deductible, and earns interest
on a tax-deferred basis. The health insurance policy itself
can be purchased with a 100% co-insurance, so that most
items are then covered at a 100% basis.
The result is that the insurance premiums are reduced due
to the higher deductible and the tax savings give an even
lower net cost. Rather than pay premiums for items such
as doctor co-pays, routine care, etc, the insured funds
these out of the personal account on a tax-favored basis.
If the money in the account is not used for medical expenses,
it can be carried over to retirement.
What are the Valuable Advantages of Having an HSA?
