As the cost of health care continues to rise, many employers believe that their only solution is to shrink employee benefit plans. Health Savings Accounts can provide a better solution.

Health Savings Accounts (HSA) are tax-free savings accounts that Employees can open if they have a Qualified High Deductible Health Plan (HDHP). With an HSA, you save money by having a high deductible insurance plan with lower premiums. In some cases the insurance premiums are up to 50% less than the typical low-deductible insurance plans. The HSA can then be used to reimburse qualified expenses until the  deductible is met and then insurance coverage takes over.

A health savings account is a portable account that the employee can keep even if they change jobs, change medical coverage, become unemployed, move to another state or change marital status. An HSA provides a tax deduction when contributions are made to the account.  Also, the employee can receive tax-free earnings through investment and tax-free withdrawals for qualified medical expenses.

There are two components that make an HSA.

1. You have a qualified high deductible health plan.
2. You open a Health Savings Account.

Contributions can be made to an HSA each year that the employee is eligible. These contributions can be made by the employer, the employee or both.

Once a contribution has been made to the account, the employee can start to use the HSA to get reimbursed for qualified expenses. One thing to keep in mind is that employees can only withdrawal the amount of money which is already in the account. HSA funds can be used to cover health insurance deductibles, coinsurance, out of pocket medical expenses, dental expenses, and vision expenses. The funds can also be used to pay health insurance premiums during any period of unemployment.

The contribution limits change annually.