Health Savings Accounts
(HSA)

What is an HSA?

An HSA is an account established by an employee to set aside money for future out-of-pocket medical expenses such as deductible expenses.

HSA Plan Features

An HSA must be accompanied by a qualified High Deductible Health Plan (HDHP).

The employee, employer, or both may fund an HSA.

Annual HSA contributions can be made to a maximum of $2,900 per individual, $5,800 per family (2008).

In 2009 the annual HSA contribution limits will be $3,000 per individual, and $5,950 per family.

The individual employee owns the HSA account and has discretion over how funds are spent.

Funds may roll from year to year and can generally be invested in higher yield accounts.

What qualifies an HDHP?

An HDHP must have a minimum deductible of $1,100 per individual, $2,200 per family (2007). This has not changed for 2008.

In 2009 the minimum deductible for an individual will be $1,150, and for a family it will be $2,300.

First dollar coverage may only be provided for certain preventive care.

Prescription drug coverage before the deductible is met is not allowed.

Are contributions to an HSA taxable?

No, contributions by an employer are fully deductible. Contributions by an employee are also tax-free.

In fact, contributions will grow tax deferred and are tax free upon withdrawal as long as they are used for qualified medical expenses.

How can an HSA save me money on health insurance premiums?

The premiums for a HDHP are generally substantially lower than a traditional health insurance plan.

An HSA engages employees so they will be more aware of the cost of health care services, which can lead to better utilization habits, which could lead to lower claim costs in the future.