Health savings accounts or HSAs have been around since 2004 but are rapidly becoming more popular since the economic downturn in 2008. According to the Health Savings Account Rules an HSA is designed to be paired with a High Deductible Health Plan (HDHP) that has a deductible of at least $1200 for an individual or $2400 for a family. The benefit of the HDHP is that they often have monthly premiums that are significantly lower than other health insurance plans that have lower deductibles. In fact, it’s not uncommon to find savings of 30-50% on the monthly premiums.

The Health Savings Account component allows owners of an HDHP to set aside money (on a pretax basis) to be used to cover deductibles and other medical related expenses. Employers often contribute to the HSA of their employees as well as it reduces the overall cost of health care coverage for the company. In fact, large group employers with over 50 employees were the fastest growing market segment for HSAs the past year.

As health care costs continue to escalate industry experts expect the growth in these types of plans to continue. It seems the deductible levels continue to increase on the most popular health insurance plans so it only makes sense to combine it with an HSA. Another additional benefit of these accounts is that the balance can be rolled over from year to year so it can continue to accumulate. Then once you turn 65 and go on medicare you can withdraw any leftover money and use it for any purpose. So it’s really like having an additional Tax Advantaged source of money to use in your retirement. Saving you money now and providing a little extra in retirement certainly seems like a win/win situation.

As with all other forms of qualified plans there are a significant number of rules and regulations that you should check out prior to establishing your plan. So do your homework!