Tax-Advantaged Health Insurance
Health Savings Accounts, simply called “HSAs,” are a form of health insurance that combines a health ‘savings account’ with a High Deductible Health Plan (HDHP).
Still relatively new to the market, these tax-advantaged medical savings plans are often purchased by self-employed individuals and small employers to provide tax deducted funding as well as tax free withdrawals if used towards qualified medical expenses. HSAs, were enacted into law in January 2004 by the 108th Congress as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 under Title XII, Section 1201.
This form of medical insurance is exempt from taxation and provides for the accumulation of pre-tax dollars deposited and held in a health savings account that grows and rolls over each year to accumulate a long-term savings fund. HSA funds are also used to pay for qualified medical expenses, such as doctors visits and prescribed medications, are not considered as gross income, and can be withdrawn from the HSA savings account tax free! Accumulated funds can also be withdrawn without penalty or tax after the beneficiary (insured) reaches the Social Security retirement age.