Health Savings Accounts

Health Savings Accounts, or HSAs, were created to combat rising medical costs by providing an incentive for more consumers to pay "first-dollar" medical expenses. HSAs are accounts that are designed exclusively for covering medical expenses incurred by the HSA account beneficiary and his or her dependants

Purchase a qualifying high deductible health plan. The higher deductible, lower the premium, thus keeping more money in your own pocket.
Establish an HSA account with a qualified HSA custodian
Set aside up to 100% of your health insurance deductible into the HSA up to the legal limits
Use the money in your HSA account to pay for qualified medical expenses taken as you incur them, if you wish.

Actual Medical expenses, including doctor visits, prescriptions, transportation to get medical care, and dental care
Long Term care insurance
Healthcare coverage when unemployed
Certain continuation-of-benefit healthcare coverage; and
Certain health insurance after age 65

Contributions to HSA may be 100% deductible
Interest Earnings accumulate tax-deferred, and if used for qualified medical expenses, are tax-free.
If used for qualified medical expenses, HSA assets are not taxed.
Unused HSA assets may be used for retirement; and
Year-end account balances stay in your HSA account to be used for future years medical expenses.

You obtain coverage under a qualified health insurance plan with a minimum deductible of $1,000 for singles, and $2,000 for families.
Each year you are allowed to save 100% of the health plans annual deductible, up to $2,650 for singles and $5,250 for families in 2005.
You use the savings account to pay for lower-dollar medical expenses, or those that are not covered by the health plan.
Once you meet the deductible, the health insurance covers your medical expenses as defined in the policy.

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