What are HSAs?
Health Savings Accounts (HSAs) allow individuals to deposit pretax income into a savings account that can be used to pay for qualifying medical expenses — up to $3,050 for individuals and $6,150 for families in 2010. In return, enrollees have annual deductibles of $1,200 or more, with only certain types of care paid for by the plans. Generally, HSAs are associated with high-deductible health insurance plans. Recently there has been an increase in such plans. As of January 2010, the enrollment in high-deductible health insurance plans – including those with associated HSAs – reached 10 million from 3.2 million in January of 2006, according to America’s Health Insurance Plans.
However, there are going to be some significant changes in HSAs, starting next year. Effective 2011, subscribers no longer will be able to use HSA balances to pay for over-the-counter drugs. Also next year, the penalty for using HSAs for nonmedical expenses increases from 10% – 20% of the amount spent.