Introduction to Health Savings Account

BULLETIN: Effective Jan 1st, 2004, the HSA (Health Savings Account) expanded the existing MSA's (Medical Savings Accounts) to allow among others, the following improvements:

100% funding of the deductible up to set limits
Permanent program...no longer needs to renewed
No longer requires self-employed status
Both employer and employee funding of accounts for California Small Group insurance policies

Now...on to the Health Savings Account

Think of the HSA (health savings account) as a combination between a high deductible insurance plan and an IRA (individual retirement account)

- fund with pre-tax dollars
- accrue interest tax-deferred
- pay out medical bills tax-free

Health Savings Accounts were created to go hand-in-hand with a qualified high-deductible health insurance care plan so that individuals could pay less in monthly dues and put the savings (along with additional funds) in a tax-exempt Health Savings Account. A Health Savings Account allows you to use tax-free dollars to cover routine and minor medical expenses while you satisfy your deductible - expenses that would otherwise come out of your after-tax income.

Let's take a better look at how the Health Savings Account works...essentially there are two parts