Health Savings Account Blog

HSA-qualified health insurance plans have high deductibles of $1,100 or more. By doing a tax-free rollover from their IRA, individuals can immediately fund their Health Savings Account so that the deductible can be covered 100%. That basically removes the risk of going with a high-deductible plan.

Health savings accounts are special tax-favored savings accounts that anyone with a qualified high-deductible health insurance plan can open and fund. Any money put in the account is tax deductible, and can be used tax-free to pay for future medical expenses. If the money is not withdrawn, it continues to grow tax-deferred like an IRA. HSAs first became available in January 2004, and today nearly five million people are covered by an HSA-qualified health insurance plan.

HSA plans have much lower premiums than traditional co-pay plans, but they do have a higher deductible. Medical expenses that someone incurs before they meet their deductible can be paid for from the HSA, but if they've just opened their HSA they may not have had enough time to accumulate much money in it. The tax-free IRA rollover solves that problem. I expect that by sometime in 2007 sales of HSA plans will eclipse co-pay plans as the preferred type of health insurance among individuals purchasing their own plans.

Both IRAs and HSAs are special tax-favored accounts that can be funded with tax-free money, and that grow tax-deferred. But HSAs have an additional tax advantage over IRAs: if the money is withdrawn to pay for qualified medical expenses, taxes never need to be paid on those funds. This makes HSAs a much preferred way to save for future medical expenses.

According to Fidelity Investments, the average couple retiring in 2006 will need $200,000 to cover medical expenses, not even counting dental, over-the-counter medications, or long-term care. And that amount is going up every year. Those who have an HSA could have thousands of additional dollars available to them to cover these expenses in their retirement years.

To help people who are buying their own health insurance understand these changes, HSA for America is hosting weekly teleseminars throughout the rest of 2006. If someone can get their coverage in place before December 31, they can lock in 2006 rates for the next 6 - 24 months.

Please visit http://www.health--savings--accounts.com for complete information.