HSAs combine a high deductible health insurance policy and a tax-favored savings account. Instead of buying a health insurance policy with a $250 deductible, you'd buy a policy with a $5,000 deductible. It sounds scary, but that policy costs much less. The money you or the company saves on insurance premiums -- as much as 40 percent of traditional costs -- can go into a special, tax-deductible savings account and be used to pay for medical expenses tax-free. Unspent money grows for future years' expenses.
Many employers contribute some or all of their insurance premium savings into accounts for their employees. In 2006, an individual can put as much as $2,700 a year into an HSA, or $5,450 for families. But you can start an HSA account with a much lower amount. For those who can't afford a contribution, the high-deductible, low-cost medical insurance plan will at least protect them against bankruptcy caused by medical expenses.
Monday, January 30, 2006
Terry Savage in Today's Sun Times on Health Savings Accounts
Terry Savage writes on the new HSA plans. They will grow and the impact on us huge. Medicaid, Medicare, and any Health Insurance initiative will need to be redesigned around them.