This guide contains:

Background on health savings accounts (HSAs)
Features and qualities to look for in health savings accounts
How to find the best health savings account for you

This short guide was created to help you understand the basics of health savings accounts, and to help you choose the right HSA for you. We do not offer any health savings accounts ourselves, so you can be assured that all of the information in this guide is independent and unbiased.

Background on health savings accounts
Health savings accounts were established in 2004 as a new way to manage a person or company's health care costs. The basic theory of the HSA is that consumers will shop more wisely for health care when paying with their own dollars instead of the insurance company's dollars. Health savings accounts are structured so that the patient pays for most routine medical expenses out-of-pocket, but major medical costs will be covered.

Features and qualities to look for in health savings accounts
There are two individual components that make up a HSA:

1. High Deductible Health Plan (HDHP)
As its name implies, an HDHP is a health plan that offers a high annual deductible. The definition of a high deductible changes from time to time, but when the H.S.A. program was started in 2004, the minimum deductibles were $1,000 for an individual and $5,000 for families. The patient(s) is responsible for paying all medical expenses in a given year until the deductible is met, at which time the plan provider pays for all qualified medical expenses for the remainder of the year. This places more responsibility on the patient for smaller and routine expenses, but protects you in the event that something major or catastrophic happens.

2. Tax-Exempt Savings Account
The tax-exempt savings account is an account held with a financial institution that allows you to contribute money on a tax-free basis to pay for qualified out-of-pocket medical expenses on a tax-free basis. Because the high deductible health plan has lower monthly premiums than traditional health insurance, the money 'left over' every month can be deposited into the tax-exempt savings account to pay for future routine medical expenses, including dental and vision care. You can contribute money into the tax-exempt savings account up to the amount of your annual deductible. This money can earn interest, and your contributions can accumulate for years; any money left over when you hit retirement age can be taken out tax-free under certain situations.

NOTE: it may be confusing when researching HSAs because some people define an H.S.A. as just the tax-exempt savings account, while others define