HSAs - Will They Revolutionize the Healthcare Industry?
Health Savings Accounts (HSAs) were created by the Medicare Prescription Drug, Improvement & Modernization Act of 2003. Simply put, an HSA is a combination of a qualified high-deductible health plan and an individually-owned bank account that pays interest. The employer chooses the plan which coordinates the health plan and bank account distribution. The bank account deposits are made with employee pre-tax payroll deductions.
The bank account is designed to cover qualified medical expenses that are not eligible for payment under the health plan. Employees can draw from the account or let it grow. Unused HSA funds can roll over from year to year even if the employee changes jobs and can be used to save for retirement. Money is tax free going in, tax free growing, and tax free coming out if used for eligible medical expenses.
Insurance carriers are gearing up to sell HSAs. It remains to be seen if the premiums will be low enough to encourage employers to offer HSAs to their employees.
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