Components

• An HSA consists of two components: the savings account and the health insurance plan. The savings account is similar to an Individual Retirement Account in that it consists of money that is contributed by the policyholder and can earn interest. The health insurance plan is a specific major medical plan designed for use only with an HSA.
  
  

Eligibility

• There are no specific eligibility requirements to enroll in an HSA in Florida. Users only need to qualify based on their health history and their ability to open the savings account by depositing the amount of the annual deductible. An HSA may be chosen in lieu of a standard health plan offered through an employer if one is not offered as an option. It can also be an inexpensive health insurance alternative for the self-employed.
  
  

Minimums and Maximums

• The federal government determines the minimum deductible amounts, maximum out-of-pocket expenses, and the maximum allowable contributions. In 2009, the minimum deductible is $1,150 for an individual and $2,300 for a family. The maximum out-of-pocket amount an individual will have to pay is $5,800 and $11,600 for a family. The most an individual can contribute to the savings account during the year is $3,000 while a family is capped at $5,950.
  
  

Withdrawing Funds

• Funds can be withdrawn from the HSA on a tax-fee basis as long as they are used to pay for medical expenses. Some Florida insurers will even issue their policyholders a debit card to make the funds more easily accessible. If the funds are not exhausted during the year, they simply "roll over" into the next year and continue to earn interest. Eventually, any remaining money can be withdrawn to help fund a retirement if desired.
  
  

Illustration

• Here is an illustration of how an HSA works. Suppose a family of four enrolls in an HSA where the premium is $300 a month, and they decide to place $400 into the savings account for a total expenditure of $700 per month. Assuming their income level places them in the 28 percent tax bracket, they would be able to deduct $84 ($300 x .28) for the cost of the insurance and another $112 ($400 x .28) for the contribution to the account for a total deductible amount of $196 per month. This means the actual cost is really only $504 per month ($700-$196). However, when you take into consideration the fact that $400 of the $504 goes into an interest-bearing account, the true net cost is $104 per month.