By: Robert V. Sytz, Jr., CPA, CFP^®

HSAs Explained

Health Savings Accounts (HSAs) were established by the Medicare Act of 2003 as a consumer directed plan to help control rapidly escalating medical costs. Doctors with high deductible health insurance plans are eligible to make tax-deductible contributions to HSAs, which can grow tax-deferred, and can be paid out tax-free for future medical expenses.

Since future medical expenses are being paid from funds contributed by the consumer, and not by some insurance company, medical costs should be held in greater check as consumers drive a “hard bargain” for the cost of their medical care. These plans encourage consumers to ask their physician, hospital, and other health care provider up front what their fees will be for the procedures needed, and encourage comparison shopping based on quality and price.

In order to qualify for a HSA contribution, the doctor must be covered under a medical insurance plan with a minimum deductible of $1,200 for single...