Health Savings Accounts
Simply put, an HSA (Health Savings Account) is a tax advantaged way to pay for health care. It works like this: an individual buys a high-deductible insurance policy to cover major medical expenses, and then sets money aside each month in a specially designated health savings account - that's the HSA part - to pay for everyday health care costs. The health savings account is owned by the individual, which means money not used one year can be rolled over into the next. If there's a job change, the HSA moves, too. Money earned in a Health Savings Account accumulates tax-free, and whatever is withdrawn for medical expenses is also tax-free.
HSA Qualified Health Insurance
A health insurance plan is considered to be HSA qualified if it has an annual deductible of $1000 for individual coverage or $2000 for family coverage and meets federal requirements. Premiums charged for these policies can be anywhere from 20% to 50% less than those for traditional, low-deductible plans. In other words, they are plans more individuals will be able to afford.
Proponents of HSA plans say they will create more-astute health-care consumers. When individuals pay for office visits and prescription drugs from health savings accounts they themselves fund, they will be less likely to run to the doctor for every minor ailment and more likely to ask about cheaper generics. There is a disconnect between patients, doctors, and the cost of medicine. A patient has no idea if a drug costs $20 or ten cents a tablet, and the way the system is set up today, doctors have no reason to explain the difference.
HSA plans were created to help reign in health-care costs that industry followers say have risen nearly 100% since 2000. They are part of the Medicare bill that was signed into law in December 2003.
