Health Savings Accounts

Health Savings Accounts - HSAs

Health Savings Accounts - The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created a new, tax-advantaged way for certain people to save for health care expenses. You must be covered by a high-deductible health plan to open and contribute to a Health Savings Account (HSA). IRS and Treasury have provided guidance on how HSAs work. A Health Savings Account (HSA) is a special account owned by an individual where
  • Contributions to the account are to pay for current and future medical expenses

  • HSAs are used in conjunction with a “High Deductible Health Plan” (HDHP)

  • Insurance that does not cover first dollar medical expenses (except for preventive care)

  • Can be an HMO, PPO or indemnity plan, as long as it meets the requirements

Health Savings Accounts June 27, 2008 Update

A new Tax Bill that has passed the House and is now in the Senate, would add a very heavy administrative burden on both employees and employers offering Health Savings Accounts.

Under the new proposal, "HSA holders would be required to substantiate each and every purchase with their HSA custodian beforehand."

English translation: Every time an employee wants to spend any of the money he/she has contributed to his/her own HSA account on any type of health related expenses, they must first get okay from their employer's plan administrator.

And, in case that alone doesn't put HSA's out of business, House Speaker Nancy Pelosi has gone on record saying she wants to abolish HSA's altogether.

Health Savings Account - Tax EXEMPT

A health savings account is a new tax exempt health account. Under a health savings account employees or the self employed can accumulate pre-tax savings inside their health savings account for smaller expenses such as co-payments, non-covered health services, or medical services before the deductible are met.

Two major benefits OF the Health Savings Account
  • the ability to pay smaller medical expenses and fees with pre-tax health savings account funds.
  • reduced health insurance premiums.
Health plan premiums can be reduced because a health savings account must be paired with a qualifying "high deductible health plan." Since health insurance premiums are generally lower for higher deductible plans opening a Health Saving Account reduces premiums paid by the employer, employee, or self-employed individual.

Putting the two benefits together can mean reduced costs for common medical services, and lower insurance premiums without risking protection for major illness or serious accidents.

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