I'm Frank J. Eberhart, CEP, RFC I am a Financial Advisor, and author that provides Health Care, Payroll- HRIS/HRMS - Employee Benefit services to small to mid-size business. I have an HSA for my own company.

Most companies or individuals do not understand the benefits of the fairly new HSA accounts created to help offset the rising costs of health care. What is an HSA?: Health Savings Account, it is a personal account set up by an employer, of which both the employer and the employee can contribute up to the maximum amount allowed, $2900 single and $5800 per calender year (indexed to inflation). Unlike HRA or Flex plans, your money rolls over each year and it goes with you if you leave your job. The plan is not popular with the Democratic party because their view it is a tax break for the wealthy. I agree it is employer driven, however-Everybody benefits from HSA plans.

If the employer funds the HSA for an employee (for whatever amount they wish) it is a tax deduction for them, premiums are pre-tax so FICA tax is saved, the employees receive the same tax advantage, any portion of the premium they pay is also tax deductible from dollar one (the 2% of income does not apply), most companies offer prescription drug discounts, free well visits once a year, OBGYN are generally just a co-pay, and of course everything you purchase over the counter for prescriptions, aspirin, eye glasses, orthodontia, are tax deductible (and a lot more). Your contribution to your HSA is tax deductible, it grows tax-free in an array of investment selections (if you reach a certain dollar amount contribution-generally around $2000), and most companies offer on-line services that you can see what your next prescription or services will cost you.

The real difference: A high deductible out of pocket is one of the requirements, most carriers put that at 1650 single, 4000 family, your premiums are generally lower than traditional health care, what that means is the first $1650 is on you, then the plan resorts to regular co-pays and prescription co-pays (if you spent 1650 you now have a 1650 deduction).

Lets say you go to the hospital for a major procedure like open heart surgery, normally you pay your out of pocket deductible (1,000, 2500, etc which is not tax deductible unless you reach 2% of AGI (adjusted gross income) and anything over that you can deduct) the insurance pays 80% and you are responsible for 20%-as my six year old would say-that's a really big number.

Under the HSA, you would pay the 1650, and then 330 a day for 5 days in the hospital or 3300 total(which is now a tax deduction). However, that is your limit of your liability-3300, everything then resorts back to normal co-pays for drugs etc. (depending on the carrier) Is essence, you are insuring catastrophic vs. incidental.

Everybody can win with an HSA, one of the biggest causes of bankruptcy is still from medical bills. For small busiess you can add a POP plan (premium only) it is a section 105, which now makes all your medical deductions pre-tax and a deduction from dollar one.

There a few rules to abide by that IRS has established. It may be worth talking to an expert on HSA plans to see if it matches your companies needs. If you are retired with passive income you can also qualify for an HSA.

My current book will help you set up your estate, budgets, and investments it is designed to help you understand how it works.

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