Insurance Quotes & Advice

A Health Savings Account(HSA) is a special medical account with preferential tax treatment eligible to individuals or families enrolled in High Deductible Health Plans(HDHP). 

 For 2008, individuals are qualified if they are enrolled in a health plan with at least an annual deductible of $1,100, for families the amount is $2,200 and are allowed to contribute a maximum of $2,900 and $5,800 respectively during the calendar year.

Money contributed to a HSAs are tax deferred and can be invested and gain in value like an IRA.  Funds withdrawn and used for qualified medical expenses receive no federal tax liability.

Despite the positive tax benefits and the lower cost of premiums of HDHPs, HSA have been slow in gaining popularity. A number of healthcare providers surveyed reported that only a fraction of those eligible actually open a HSA.

HSA were created in an effort to combat the growing problem of healthcare in this country, namely the cost.  By giving more control and accountability to consumers, it was believed that it would reduce the cost for routine medical care.

A common criticism of the plan is that it only benefits the young and healthy or the wealthy, which can use HSAs as tax shelters.  Many believe those of the lower income classes which would be more likely to qualify for HSAs due to the higher occurrence of HDHPs, don’t earn enough and currently lack incentive to invest in these plans.