Principles of Risk Management and Insurance, 13th Edition

Health Savings Accounts

Federal legislation allows all eligible persons under age 65 to establish health savings accounts and receive favorable income-tax treatment. A health savings account (HSA) is a tax-exempt or custodial account established exclusively for the purpose of paying qualified medical expenses of the account beneficiary who is covered under a high-deductible health insurance plan. Health savings accounts have two components: (1) a high-deductible health insurance policy that covers catastrophic medical bills and (2) an investment account from which the account holder can withdraw money tax-free for medical costs. These components are discussed below.

Eligibility Requirements

To establish a qualified HSA and receive favorable tax ...