What is an HSA?

HSA, Or The health savings account, 


formerly known as an MSA (Medical Savings Account), was established by Congress in an effort to make people more responsible for their health care costs.
The HSA insurance plan itself is a high deductible plan that utilizes a PPO or HMO network. There are no copays for doctor's office vsits or prescriptions - all goes toward the deductible and then is paid at coinsurance amounts once the yearly deductible has been met. 

The HSA savings account portion is separate. As an incentive for a person to manage their health care costs, Congress allowed an insured to pay into a special HSA savings account up to the amount determined by the Government for each year. This is regardless of the deductible taken. This payment would be paid by the insured and deducted from the insured's income on a before tax basis. The insured would then be allowed to use this account to pay for medical and related expenses. The money could even be used to cover medical charges not covered by their health plan.


To further simplify, the H S A comes in two parts. One is a high deductible health plan for which you would pay a monthly premium. The second is a hedical saving account, where you could pay into the account up to a certain amount year. This amount is determined each year by the government. This account is your money. If you use the money to pay medical expenses, it is never taxed. If you do not use the money in this account, It will remain your money and essentially becomes like an IRA. The difference is between an I R A and an H S A is the H S A funds can be withdrawn at any time to pay medical expenses without penalty. Also, any excess funds must remain in the H S A account until age 65 in order to be withdrawn without penalty. Any monies withdrawn after age 65 will be subject to regular income tax at the time of withdrawal.


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