Health Savings Accounts: An Option for the Self Insured

Health Savings Accounts (HSA) are a relatively new alternative to traditional health insurance plans. As a savings tool similar in concept to an IRA, it allows individuals to pay for current medical expenses and save money on a tax free basis for future medical and health care costs. The many benefits of the HSA make it an attractive option for paying for health care.

An HSA is a tax free savings account set up to pay for out of pocket health expenses, placing the control of that money solely in the hands of the account holder. To be able to take advantage of HSAs, it is necessary to be covered by a High Deductible Health Plan (HDHP), which is a low cost health insurance plan. Money that is saved on health care premiums can be used to fund the HSA. HSA funds can be used to cover medical expenses that the HDHP does not pay for. The HDHP is then available to cover qualified health care expenses beyond the amount of money available in the HSA.

To qualify for an HSA, the HDHP minimum deductible must be no less than $1100 for an individual or $2200 for a family. HSAs can be opened with banks, credit unions, insurance companies, through an employer or other approved companies.

Because HSAs are funded with pre tax dollars, they can reduce federal and state income taxes, and reduce adjusted gross income. They can be also be used to pay for Medicare related expenses and long term care insurance. HSAs and HDHPs work together to make health care more affordable and accessible to many individuals who would otherwise have no health insurance coverage at all.

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