A Health Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States. The funds contributed to the account are not subject to federal income tax at the Bupa Global of deposit. These may be used to pay for qualified medical expenses at any time without federal tax liability.
Another feature is that the funds contributed to Health Savings Account roll over and accumulate year over year if not spent. These can be withdrawn by the employees at the time of retirement without any tax liabilities. Withdrawals for qualified expenses and interest earned are also not subject to federal income taxes. According to the U.S. Treasury Office, ‘A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care.
HSA’s enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.’ Thus the Health Savings Account is an effort to increase the efficiency of the American health care system and to encourage people to be more responsible and prudent towards their health care needs. It falls in the category of consumer driven health care plans.
Origin of Health Savings Account
The Health Savings Account was established under the Medicare Prescription Drug, Improvement, and Modernization Act passed by the U.S. Congress in June 2003, by the Senate in July 2003 and signed by President Bush on December 8, 2003.
The following individuals are eligible to open a Health Savings Account –
– Those who are covered by a High Deductible Health Plan (HDHP).
– Those not covered by other health insurance plans.
– Those not enrolled in Medicare4.
Also there are no income limits on who may contribute to an HAS and there is no requirement of having earned income to contribute to an HAS. However HAS’s can’t be set up by those who are dependent on someone else’s tax return. Also HSA’s cannot be set up independently by children.