Save money on your taxes and earn interest on unspent health insurance savings.
A great way to beat the high cost of health care, health savings accounts are in high demand. But shoppers do not usually understand what a health savings account is. Health Savings Account (HSA) allows individuals and families to save for future qualified medical and retiree health expenses on a tax-free basis. A Health Savings Account is a tax free account linked to a high deductible health insurance plan. After the annual deductible is satisfied, policy holders will receive comprehensive coverage.
To counteract the high deductible, participants contribute pre-tax dollars of up to $3050 for an individual (in 2010) and $6,150 (in 2010) for a family into a health savings account. Withdrawals will be tax-free from the health savings account as long as it is used for any medical purpose. Money that is unspent is rolled over and accumulates interest therefore creating a savings and investment for the participant.