Health savings account
From open-encyclopedia.com - the free encyclopedia.
The Health savings account (HSA) is the new name for the Medical savings account (MSA) plans in the United States. The provisions of the MSA were made more advantageous and available to more people in the new HSA. The changes were made in legislation signed by George W. Bush on December 8, 2003.
The Health savings account is a tax advantaged savings plan to cover current and future medical expenses. It allows money to be put into a tax deferred plan before tax is paid on it and be withdrawn tax free for qualified medical expenses.
The primary change from the old MSA is the lowering of the minimum deductible for the necessary health insurance to qualify for the plan to $1,000 for a single person and $2,000 for a family.
Proponents say HSAs give individuals an incentive to save on health care, since they pay the first few thousand dollars of cost out of pocket. Critics say that is a bad thing, since people skimp on preventing diseases before the condition becomes serious.
Health care analysts also criticize HSAs for being much more valuable to upper income individuals than lower income individuals. If a person in the 30% tax bracket put $5,000 into an HSA, the government would contribute $1,500. If a person in the 10% tax bracket were able to put in $5,000, the government would only be contributing $500. The tax deduction cannot be used against payroll taxes.
Most people who use HSAs would already have health insurance.
