An Overview of Health Savings Accounts

March 30, 2012 — 2,036 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

When companies provide their employees with medical insurance, staff members are at the mercy of what insurance carriers have decided to cover. The cost of additional plans can be prohibitively high for many workers, which is why quite a few companies have begun to provide interested employees who are enrolled in high-deductible insurance plans with a health savings account or HSA.

An HSA is essentially a tool that lets workers put money toward medical costs in a way that isn't subject to excessive taxation. Both employees and their employers can contribute to a health savings account, though there are no strict guidelines for how much each party should add.

Unlike a flexible spending account, funds from an HSA can be rolled over from one year to another. This money must be used for approved medical expenses, which can be done at any time. Like individual retirement accounts, employees are encouraged to use these funds for non-medical expenses so long as they've reached a predetermined retirement age. If they haven't, their formerly tax-free funds are then subject to some federal taxation. This is done to encourage workers to save their money for medical expenses and reduce the burden placed on group health insurance plans.