A health savings account (HSA) is a savings account available for tax payers in the United States who are also enrolled in a high deductible health plan, also known as HDHP. The great thing about a health savings plan is that at the time of money deposit, the amount is not subject to incoming taxing. The funds also are on a roll over plan. This means that if the amount is not used up over a certain period of time (such as a month) it will roll over and add onto the amount of the following period of time. This of course means a fairly fast accumulation of the health savings account amount for when something does happen and a large sum of money is needed.
Unlike Health Reimbursement Arrangements, health savings account is owned not by a company but by an individual. This makes matters simpler as there no employee/company dealings and legal issues to work out for every singly health payment. Instead, the HSA can be used by the individual whenever needed for any medical emergency or non emergency costs. As of 2011, however, over the counter drugs cannot be bought with a health savings account without a doctor’s prescription.
There are both proponents and opponents of the health savings account. Those who favor the money fund say that it helps reduce the growth of health care costs and may even increase the efficiency of the entire health care system. However, some skeptics say that it does quite the opposite. Opponents of the health savings account claim that it will worsen the health care system because what will happen is that healthy people to get the health savings plans and sick people will avoid it.
Essentially how the health savings account works is similar to any savings account to which a certain amount of money is deposited. This deposit may be made by the individual who has the HSA or his/her employer who also provides health coverage on the job. There are complicated rules of how much can be put into the savings over what period of time and how the savings amount will be taxed by the government. Basically, the maximum amount that can be deposited changes every year based on the economy and the interest rates that year. No matter what the amount deposited however, the money becomes the property of the policyholder. As mentioned earlier, the funds deposited during a given year and not used, will roll over into the next year and not effect the maximum deposit that can be made that year. For those who cancel their health savings account, they forfeit the ability to deposit any more money, but whatever sum they have upon cancellation is still theirs to use.
Some companies offer the option of a health savings account to all their employees. This may be advantageous for the employee because it guarantees a safe source of money in case of medical needs. However, some people choose to manage their own medical emergency funds without the involvement of government organizations.