Health Savings Accounts

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A Health Savings Account is an alternative to comprehensive health insurance; it is a savings vehicle that allows people a different way to pay for their health care. The idea is that people can pay for routine health care services out of their pockets and save for future medical health expenses. The money in the HSA grows tax-free.

You use HSAs in conjunction with traditional health insurance policies as long as the policies are “high deductible” policies.

HSAs were advocated by free market theorists as a way to control health care costs by introducing additional market discipline to the medical industry. These advocates hope that people with HSAs will be more discriminating about health care purchases and shop around, rather than go anywhere at any cost when an insurance company is paying for it. They also function as essentially a tax cut.

Even though the Affordable Care Act of 2010 revamped much of how Americans pay for health care, health savings accounts were largely unaffected. They are still an option.

The rule is that you have to be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. The government set this rule so people did not start HSAs but have no insurance at all. The minimum deductible in the HDHP is $1300 for individuals and $2600 for families. There are other rules, too.  Check with your insurance provider about whether your plan is “HSA Eligible”.  You can find this out before you sign up for the plan.  iThat’s a pretty high deductible, and HDHPs are usually cheaper than more traditional health insurance with lower deductibles. Tthe money that you save on insurance can be put into the Health Savings Account. That’s the idea that advocates push, anyway. What the HDHP actually covers can vary widely..

You own and you control the money in your HSA. You decide how to spend the money without a health insurance company telling you what to do. You also decide what types of investments to make with the money in the account in order to make it grow.

“Tax Relief and Health Care Act of 2006″ was passed by both houses as Congress  and signed into law by President Bush on December 20, 2006. When he signed the law, Bush said it was estimated that 3.6 million HSAs had been opened.

The free market think tank National Center for Policy Analysis published a survey indicating that “the number of HSA- covered lives and accounts will double from January 2008 to January 2009″ and reporting that financial advisors have started warming to HSAs. Mercer LLC estimates 19% of employers will offer HSA-eligible plans in 2009. Large companies are more likely to offer them than small companies.

The maximum yearly contribution is now $3,350 for an individual and $6,650 for a family. The maximum HSA contribution is pro rated based on the number of months of the year that you are eligible. In other words, if the you have a conventional low-deductible insurance plan from January through April but then switch to a HDHP the first of May, you can contribute $2233 as an individual.

The maximum contribution changes from year to year, so consult the IRS or a knowledgeable tax professional for the limit in any given year..

People over age 55 can make “catch-up contributions” in addition to normal contributions. The limit for catch-up contributions is $1000 in 2015. The maximum annual out-of-pocket amounts for HDHP is now $6,450 or individuals and $12,900 for families.


Eligibility for Health Savings Accounts

Finding Health Savings Accounts


Criticism of Health Savings Accounts

Have HSAs been a success?

This website is an informational site only. We do not buy or sell or recommend HSA plans.