Health Savings Account

HSA or Health Savings Account is basically an IRA account for current and
future health-care expenses and supposed to help retirees pay for just a
fraction of future health-care expenses. HSAs were created by the
Medicare bill signed by President Bush on December 8, 2003.

To be eligible for a Health Savings Account, an individual must be covered
by a HSA-qualified High Deductible Health Plan (HDHP) and must not be
covered by other health insurance that is not an HDHP.

The money contributed is tax-deductible, grows tax-free and can be
withdrawn tax-free for medical expenses. A worker who can contribute
$1,000 per year for 40 years in an HSA could accumulate $133,400 to pay
for future health-care expenses. If the same worker contributes $2,650
per year, the HSA nest egg could grow to a whopping $474,200.

For 2005, the most you can put into an HSA is $2,650 if you have single
coverage and $5,250 for a family. Those amounts will be increased for
inflation in future years.

For more details consult HSA page of The US Department of Treasury.

What is HDHP? The HDHP (High Deductible Health Plan) features
higher annual deductibles (a minimum of $1,050 for Self and $2,100 for
Self and Family coverage) than other traditional health plans. The
maximum amount out-of-pocket limits for HDHPs in 2005 is $5000 for
self and $10,000 for Self and Family enrollment. You may have the choice
of using in-network and out-of-network providers. Using in-network
providers will save you money. With the exception of preventive care, you
must meet the annual deductible before the plan pays benefits. Preventive
care services are generally paid as first dollar coverage or after a small
deductible, or copayment. A maximum dollar amount (up to $300, for
instance) may apply.