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Category: Personal Savings
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A Health Savings Account (HSA) is like a personal savings account, but the money is used only for qualified healthcare expenses. The account can be set up with you as the sole beneficiary, or for you plus your spouse and/or dependents. Established in 2003 as part of the Medicare Prescription Drug, Improvement and Modernization Act, HSAs allow people with High-Deductible Health Plans to pay for current healthcare expenses and save for future expenses on a tax-favored basis. Here, we look at the eligibility requirements, pros and cons and other important details about Health Savings Plans.

Eligibility

To be eligible for an HSA, you must be enrolled in a special health insurance plan called a High-Deductible Health Plan, or HDHP. While these plans have high deductibles, monthly premiums are typically much less than for plans with lower deductibles, which makes them appealing to people trying to minimize up-front costs associated with healthcare. HDHPs are intended to cover serious illness or injury, and with the exception of preventive care (such as annual physicals, child and adult immunizations, and screening services), your annual deductible must be met before any plan benefits are paid.

According to federal guidelines, you can open and contribute to an HSA if you are:

The IRS establishes guidelines (adjusted for inflation) for HSAs and HDHPs each year, based on individual and family coverage. For 2014, all HDHPs must have a minimum deductible of $1,250 for individuals and $2,500 for families. The out-of-pocket maximum (including deductibles, co-payments and coinsurance, but not premiums) cannot exceed $6,350 for individuals and $12,700 for families. For more on this, see Rules For Having A Health Savings Account (HSA).

Advantages

Health Savings Accounts offer a way to save for - and pay for - healthcare expenses. There are many advantages to having a Health Savings Account, including:

Disadvantages