Reap Benefits With an HSA

Kevin McCormally: I am Kevin McCormally of Kiplinger's and I am here with Mary Beth Franklin, Senior Editor of Kiplinger's Personal Finance magazine to talk about health savings accounts. Mary Beth, this is just yet other part of the alphabet soup that favorite programs have become. What is an HSA? Mary Beth Franklin: It's an account that allows you to put tax deductible dollars into a set aside account and then you use that to pay your medical bills. Kevin McCormally: Can anybody have an HSA? Mary Beth Franklin: No. First you have to have a high deductible health insurance policy and you also have to be under 65 years old. Kevin McCormally: So can you explain to me how they work? Mary Beth Franklin: Well it works in tandem. You have a high deductible house insurance policy were you have to have at least a thousand dollar deductible if you are single and twice of that for a family and then you can put up to the amount of deductible in your tax deductible account. Kevin McCormally: So you actually end up paying your bills from the deductible with this tax free money. Mary Beth Franklin: You can do that or another feature of this is you can roll this money over from year to year, so you can either use it for your out of pocket medical expenses now if you need the money or you can almost use it like another sort of retirement account to roll over year after year. Kevin McCormally: This sounds like something that self employed people who buy their own insurance would use. Is there any role here for employees who get there insurance at work? Mary Beth Franklin: It's certainly a real boom for self employed people. It's a great way for them to save and hold down their expenses. Now more employees are starting to be faced with these choices. As health care cost are rising, employees are looking for ways to cut their expenses and high deductible health insurance plan tends to be cheaper then a traditional policy. Kevin McCormally: What about for the employees? Is it good for the employees? Mary Beth Franklin: It can be, particularly, if your employers is kicking in some money as incentive, that's a great idea. Particularly, if you are young and healthy this money can just grow. It can be another savings account. Kevin McCormally: Okay, thank you very much.