Health Savings Accounts – An American Innovation in Health Insurance

INTRODUCTON – The term “health insurance” is commonly used in the United States to describe any plan that helps pay for medical expenses, whether or not through privately purchased insurance, interpersonal insurance or a non-insurance social welfare program funded by the government. Alternatives for this usage include “health coverage, ” “health care coverage” and “health benefits” and “medical insurance. ” In a more technical sense, the word is used to describe any form of insurance plan that provides protection against injury or even illness.

In America, the health insurance industry has changed rapidly during the last few years. In the 1970’s most people who acquired health insurance had indemnity insurance. Indemnity insurance is often called fee-forservice. It is the traditional health insurance in which the medical provider (usually a doctor or hospital) is compensated a fee for each service provided to the patient covered under the policy. An important category associated with the indemnity programs is that of consumer driven healthcare (CDHC). Consumer-directed health plans allow individuals and families to have higher control over their health care, including whenever and how they access care, what kinds of care they receive and how a lot they spend on health care services.

These plans are however associated with higher deductibles that the insured have to pay using their pocket before they can claim insurance money. Consumer driven health care plans include Health Reimbursement Plans (HRAs), Flexible Spending Accounts (FSAs), high insurance deductible health plans (HDHps), Archer Medical Savings Accounts (MSAs) and Wellness Savings Accounts (HSAs). Of these, the Health Savings Accounts are the most recent and they have witnessed rapid growth during the last 10 years.

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A Wellness Savings Account (HSA) is a tax-advantaged medical savings account available to taxpayers in the United States. The particular funds contributed to the account aren’t subject to federal income tax at the time of deposit. These may be used to pay for qualified healthcare expenses at any time without federal taxes liability.

Another feature is that the money contributed to Health Savings Account roll over and accumulate year over year if not spent. These can be withdrawn by the employees at the time of retirement without any tax liabilities. Withdrawals for certified expenses and interest earned are also not subject to federal income taxes. According to the U. S. Treasury Office, ‘A Health Savings Account is an alternative to conventional health insurance; it is a savings product that provides a different way for consumers to pay for their particular health care.

HSA’s enable you to pay for current health expenses and save regarding future qualified medical and retiree health expenses on a tax-free basis. ‘ Thus the Health Savings Account is an work to increase the efficiency of the United states health care system and to encourage individuals to be more responsible and prudent towards their health care needs. It falls in the category of consumer driven health care plans.

Origin of Health Savings Account

The Savings Account was established under the Medicare Prescription Drug, Improvement, and Modernization Act passed by the U. T. Congress in June 2003, with the Senate in July 2003 and signed by President Bush on December 8, 2003.

Eligibility –

The following individuals are eligible to open a Health Savings Account –

– Those who are covered by a High Deductible Health Plan (HDHP).
– Those not included in other health insurance plans.
– All those not enrolled in Medicare4.

Also you can find no income limits on who also may contribute to an HAS and there is no requirement of having earned earnings to contribute to an HAS. Nevertheless HAS’s can’t be set up by those people who are dependent on someone else’s tax return. Furthermore HSA’s cannot be set up independently by children.