Health Savings Accounts - An American Innovation in Health Insurance

INTRODUCTION - The term "health insurance" is commonly used in the United States to describe any program that helps pay for medical expenses, whether through privately purchased insurance, social insurance, or a non-insurance social welfare program funded by the government. Synonyms for this usage include "health coverage," "health care coverage" "health benefits" and "medical insurance." In a more technical sense, the term is used to describe any form of insurance that protects against injury or illness.

In America, the health insurance industry has changed rapidly during the last few decades. In the 1970's most people who had health insurance had indemnity insurance. Indemnity insurance is often called fee-for-service. It is the traditional health insurance in which the medical provider (usually a doctor or hospital) is paid a fee for each service provided to the patient covered under the policy. An important category associated with indemnity plans is that of consumer-driven health care (CDHC). Consumer-directed health plans allow individuals and families to have greater control over their health care, including when and how they access care, what types of care they receive, and how much they spend on health care services.

These plans are however associated with higher deductibles that the insured have to pay from their pocket before they can claim insurance money. Consumer-driven health care plans include Health Reimbursement Plans (HRAs), Flexible Spending Accounts (FSAs), high deductible health plans (HDHps), Archer Medical Savings Accounts (MSAs), and Health Savings Accounts (HSAs). Of these, the Health Savings Accounts are the most recent and they have witnessed rapid growth during the last decade.

WHAT IS A HEALTH SAVINGS ACCOUNT?

A Health Savings Account (HSA) is tax-advantaged medical savings account available to taxpayers in the United States. The funds contributed to the account are not subject to federal income tax at the time of deposit. These may be used to pay for qualified medical expenses at any time without federal tax liability.


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