Health Savings Accounts - A Different Option for Employers

December 3, 2004 Advisory

Health savings accounts have received a lot of media attention, but, so far, employers have been slow to embrace this new approach for providing health care coverage for employees. The basic concept involves a high-deductible health plan (HDHP), coupled with a tax-favored, portable individual health savings account (HSA) that allows individuals to save for future health care expenses. The HSA may be funded by the individual, the employer or both. Withdrawals from the HSA for "qualified medical expenses" are tax-free. Contributions to and earnings on the account that are not needed for qualified medical expenses can accumulate tax-free and be carried over from year to year. Ideally, this tax-free growth opportunity will be an incentive to individual account owners to become more savvy and discerning health care consumers, thereby saving themselves money and reducing utilization and overall health care costs.