HSA Resource Center
Health Savings Account Information
Learn about qualified health savings accounts!
This online resource center provides health savings account information and will help you understand how HSA Programs work. You'll learn how high deductible health insurance plans and qualified health savings accounts work together and explore the many advantages of HSA Programs.
A Quick History of HSA Programs
The President of the United States signed legislation that allows for every United States citizen under the age of 65 to participate in an HSA. The bill allows people with qualified high deductible health insurance policies to shelter income from taxes by contributing to qualified health savings accounts (HSAs).
With the introduction of the first HSA plan in January 2004, the market has steadily been growing. Individuals are eager to set one up – which isn't surprising. These qualified health savings accounts, or "medical IRAs," give individuals greater control over their healthcare decisions, offer significant tax advantages and make it easy and economical to save for future medical expenses. They're a great opportunity.
Overview of HSA Programs
An HSA is a special tax-sheltered savings account for medical bills. Instead of buying high-priced insurance with low copays, consumers buy a low-cost, high deductible health insurance plan (HDHP) for the big bills and save the difference (in a HSA) to cover the small bills. Money deposited into the account is 100% tax deductible and can be easily accessed by check or debit card to pay medical bills tax-free – even for expenses not usually covered by insurance like eye glasses and braces.
What the account holder doesn't use for medical bills is theirs to keep – it stays in their HSA account and keeps growing on a tax-favored basis to cover future medical bills or supplement retirement, just like an IRA. Combined, the high deductible health insurance plan and HSA provides: 1) lower premiums, 2) tax advantages, 3) flexibility, and 4) more cash at retirement.
Three simple steps to an HSA Program:
1. Consumer applies for a qualified high deductible health insurance plan that meets the specific HSA design specified by Congress – keep in mind not every "high deductible" product qualifies. The premiums should be low because of the nature of the plan. Additionally, if the insured is self-employed, 100% of their health insurance premiums may be tax deductible.
2. After the HDHP is issued, the consumer establishes an HSA savings account at a qualified financial institution. There are a wide variety of investment options for clients to choose from, including mutual funds and stocks and bonds.
3. Account holder starts funding the savings account based on a schedule that fits their needs. No minimum contribution is required, however annual calendar maximums set by the IRS apply each year.
Next Page: The Basics of HSA Medical Insurance