The Basics of HSAs
What is a Health
Savings Account (“HSA”)?
What Is a “High
Deductible Health Plan” (HDHP)?
How can I get a
Health Savings Account?
How much does an
HSA cost?
What
is a Health Savings Account (“HSA”)?
A Health Savings Account is an alternative to traditional
health insurance; it is a savings product that offers
a different way for consumers to pay for their health
care. HSAs enable you to pay for current health
expenses and save for future qualified medical and
retiree health expenses on a tax-free basis.
You must be covered by a High Deductible
Health Plan (HDHP) to be able to take advantage
of HSAs. An HDHP generally costs less than what
traditional health care coverage costs, so the money
that you save on insurance can therefore be put
into the Health Savings Account.
You own and you control the money
in your HSA. Decisions on how to spend the money
are made by you without relying on a third
party or a health insurer. You will also decide
what types of investments to make with the money
in the account in order to make it grow.
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What
Is a “High Deductible Health Plan” (HDHP)?
You must have an HDHP if you want to open an HSA.
Sometimes referred to as a catastrophic health insurance
plan, an HDHP is an inexpensive health insurance
plan that generally doesn't pay for the first several
thousand dollars of health care expenses (i.e.,
your deductible) but will generally cover you after
that . Of course, your HSA is available to
help you pay for the expenses your plan does not
cover.
For 2006, in order to qualify to open
an HSA, your HDHP minimum deductible must be at least
$1,050 (self-only coverage) or $2,100 (family coverage).
The annual out-of-pocket (including deductibles and
co-pays) for 2005 cannot exceed $5,100 (self-only
coverage) or $10,200 (family coverage). For
2006, these amounts increase to $5,250 and $10,500,
respectively. HDHPs can have first dollar coverage
(no deductible) for preventive care and apply higher
out-of-pocket limits (and co pays & coinsurance)
for non-network services.
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How
can I get a Health Savings Account?
Consumers can sign up for HSAs with banks, credit
unions, insurance companies and other approved companies.
Your employer may also set up a plan for employees
as well.
How
much does an HSA cost?
An HSA is not something you purchase; its a savings
account into which you can deposit money on a tax-preferred
basis. The only product you purchase with
an HSA is a High Deductible Health Plan, an inexpensive
plan that will cover you should your medical expenses
exceed the funds you have in your HSA.
