Health Savings Accounts
How They Work

THE HISTORY:
Beginning in 1992, J. Patrick Rooney (the current Chairman of Medical Savings Insurance Company) began talking with members of Congress about an idea to control the spiraling cost of health insurance. His idea was to have people purchase high deductible insurance to cover the big bills and have a tax-advantaged account under the big deductible to cover the small bills.

In 1996, Congress passed, and the President signed, the Health Insurance Portability and Accountability Act (HIPAA). This legislation created a 4 year pilot project called Medical Savings Accounts (MSAs) that began January 1, 1997. MSAs were limited to the self-employed and small groups. The project was extended until December 31, 2003.

In 2003, through the combined efforts of Pat Rooney and others, Medical Savings Accounts were changed and are now called Health Savings Accounts (HSAs). HSAs are available to anyone under age 65 who has the qualifying high deductible health insurance in force.

Beginning in 2007, Congress changed some of the rules for HSAs to make them even more attractive. Now, regardless of your deductible, you can fund up to $2,900 as a Single, or up to $5,800 as a Family into the tax-deductible Health Savings Account.

HOW HSAS WORK:
With an HSA, you divide the money you would normally spend for full coverage health
insurance into two parts:

Part One:
You buy a much lower cost medical insurance plan to cover the big bills- the deductibles range from $1,100 to $5,600 for singles and $2,200 to $11,200 for families.

Part Two:
The rest of the money you would normally spend on health insurance you can put (taxdeductible)
into a Health Savings Account (up to the amount of the deductible). This money
belongs to you; what you don't spend is yours to keep. Medical Savings Insurance pays 5%
interest on any balance in the account. The interest accumulates tax-free.

You can pay out-of-pocket medical expenses from the HSA - or simply save it. If you do use
the money from the HSA for medical bills, the money comes out of the account tax-free.

Maximum Annual Tax-Exempt Savings Deposit in an HSA:

High Deductible Insurance

How Health Savings Account Money Can Be Used

Key Details of the Health Savings Account Law