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What Is A Health Savings Account

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A Health Savings Account (HSA) is made up of two parts: a high-deductible health plan and a Health Savings Account.

A Health Savings Account (HSA) is a special tax-free savings or investment account that can be used for specific qualified medical expenses by individuals, spouses or dependents. HSAs must be used in conjunction with a qualified high-deductible health plan.

The high-deductible health plan must satisfy specific federal requirements related to deductibles and out-of-pocket expenses. In 2007, the annual deductible must be at least $1,100 for an individual and $2,200 for a family. Annual out-of-pocket expenses (including deductibles and copays) cannot exceed $5,500 for an individual and $11,000 for a family for covered in-network services. The federal government can change the deductibles each year based on increases in the Consumer Price Index.

Deductibles must be met before any medical expenses are paid by the health plan. For example, if the family deductible is $5,000, no medical expenses for any family member will be paid (other than qualified preventative services on certain plans) unless the full $5,000 deductible has been reached.