What is a Health Savings Account, also known as an HSA?
1. HSAs are essentially tax-free medical savings accounts. You can think of an HSA as a 401(k) or an IRA dedicated to paying for your medical expenses. You contribute to the account with pre-tax dollars if you save through your employer’s plan, or your contributions are tax-deductible if you have an individual plan. Contributions are invested much like your retirement savings (investment options vary by provider), which allows for compounded growth of your savings over time. When you have qualified medical expenses, you can use the money you’ve built up in your HSA to pay for them without incurring any tax consequences. 2. You need a high-deductible health plan to qualify. To be eligible for an HSA, you also need to have medical coverage under what’s called a high-deductible health plan (HDHP). For 2008, an HDHP is defined as any health plan with an annual deductible of at least $1,100 and annual out-of-pocket expenses not exceeding $5,600 for individuals. For family coverage, an HDHP
