Legislation establishing Health Savings Accounts (HSA) took effect on January 1, 2004. HSAs and HSA eligible health insurance plans are becoming more and more popular. Here are the basics:
- A HSA is a tax-favored savings account that may be used in conjunction with a HSA-elgibile high deductible health insurance plan to pay for qualifying medical expenses.
- Choosing an HSA-elgible plan may help you save money. Typically, the monthly premium on an HSA-elgible high deductible plan is less expensive than the monthly premium for a lower deductible insurance plan.
- Contributions to an HSA may be made pre-tax, up to a certain annual limit.
- Funds in the HSA may be invested at your discretion. unused funds remain in the account and accrue interest year-to-year, tax free.
- Not all high-deductible plans are elgibile for use in conjunction with a HSA.