How Does an HSA Work?

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 expanded the health benefits available to consumers by authorizing the use of HSAs. These consumers range from the self-employed to the employer groups of any size and their employees. HSAs are designed to give you more control over your healthcare expenses by allowing you to take advantage of high deductible health insurance plans with lower premiums. There are two parts to the HSA program:

• A Health Savings Account: An HSA is an account you use to set aside funds on a pre-tax or tax-deductible basis to pay for routine healthcare - such as office visits, prescription drugs and lab tests
• A High Deductible Health Plan: To qualify for an HSA account you must also be enrolled in a high deductible health plan that provides additional protection