Health Savings Accounts Basics

As Americans continue to struggle with rising healthcare costs, Health Savings Accounts or HSA's are increasingly being used as an affordable solution. It's estimated that more than 6 million Americans are now covered by HSA plans with forecasts by the Treasury Department of 25-30 million subscribers by 2010. HSA plans have two primary components – health insurance coverage and an actual tax-advantaged savings account. You can use the money in the savings account to pay for your current health expenses, but you also own the money in the account regardless of whether your health coverage changes or you move to another city. So, HSAs offer an opportunity to build tax-advantaged savings for current and future health expenses.

With HSA plans you can put the money you save on your premiums into your tax-advantaged savings account to build interest, whereas with a traditional plan, more money is spent on premiums regardless of how much health care you actually use, co-pays, co-insurance, etc.

Do some comparative shopping, evaluating the elements associated with each plan option. Traditional plans may include: higher monthly premiums, a smaller deductible, as well as copays and/or coinsurance. HSA plans may include: lower monthly premiums and a higher deductible. So depending on your healthcare needs, a high-deductible plan may very well cost less overall than repeatedly paying a traditional plan’s copays and coinsurance.

HSAs let you roll over your unused dollars from one year to the next, so you don’t have to worry about ever forfeiting your money.