Legislation establishing Health Savings Accounts (or "HSAs") took effect on January 1, 2004. HSAs and HSA-compatible health insurance plans are becoming more and more popular. Here are the basics:
An HSA is a tax-favored savings account that may be used in conjunction with an HSA-compatible high deductible health insurance plan to pay for qualifying medical expenses.
Choosing an HSA-compatible health insurance plan may help you save money. Typically, the monthly premium on an HSA-compatible high deductible plan is less expensive than the monthly premium for a lower-deductible health insurance plan.
Contributions to an HSA may be made pre-tax, up to certain annual limits.
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 eligible for use in conjunction with an HSA. For more details on HSAs, click here.