What Is An HSA?

Answer:
HSA stands for a Health Savings Account. An

HSA is another alternative to the traditional health insurance that we are used to. This is a type of savings product that provides another way for Americans to pay for their health care costs.

An HSA allows you to pay for your current health care expenses and save for future qualified medical expenses both while you are working and in retirement in a tax-free way. In order to be eligible to take advantage of an HSA, you must also be covered buy a High Deductable Health Plan (HDHP). A high deductable health plan is generally much cheaper than a traditional health insurance plan, so in theory, the money that you are saving on premiums can be put into the health savings account.

The money in your HSA is owned and controlled by the taxpayer (you), the owner of the HSA. You make all your own decisions on how to spend the money in the HSA without having to rely on a third party or health insurance company. You also make all of your own investment decisions for the money in the HSA so the balance can grow.

The key to remember is that you cannot open a health savings account if you are not already a holder of a high deductable health plan. Sometimes this is also referred to as a catastrophic health insurance plan. In its most basic form, an HDHP is an inexpensive health insurance plan that usually doesn’t pay for the first several thousand dollars of your health care expenses (aka high deductible), but it generally covers your expenses after that point. The plan is to allow you to use your HSA to pay for the expenses that your HDHP does not cover.

In 2008, in order to qualify for a health savings account, the minimum deductible for your HDHP must be at least $1,100 for a single person and $2,200 for a family. The annual out of pocket expense (including deductibles and copays) cannot be greater than $5,600 (for a single person) and $11,200 (for a family). HDHPs are allowed to have first dollar coverage (no deductible) for preventative careand also can have higher out of pocket expenses for services outside of the network, and they will still be eligible.