Wednesday, July 27, 2005

Health Savings Accounts...

The growing popularity of Health Savings Accounts appears to be driven by lower insurance premiums but, it also presents an opportunity to accumulate money tax free which can be used to fund future health care expenses.

Under federal law, your HSA must have a minimum deductible of $1,000 a year for an individual and $2,000 for a family; maximum out-of-pocket expenses - for example, co-payments required for surgical procedures - cannot exceed $5,100 for individuals and $10,200 for families.

Policyholders, meanwhile, can set up HSAs that they fund with their own money. Employers also can contribute to their workers' HSAs. HSA contributions, generally set at an amount equal to the policy's deductible, can be used to cover health-care costs, and unused money can be carried over at year's end. This differs from company-sponsored Flexible Spending Accounts, health-care savings plans in which unused money is forfeited after Dec. 31 of each year.

Some companies are replacing existing catastrophic health coverage plans with the new plans because they see HSAs as a good way for workers to handle the higher deductibles. When compared to existing health insurance plans, HSA's appear to be a way of health care consumers more mindful of their health-care spending decisions.


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