The health savings account is an excellent way to help fund health expenses. The tax favored treatment of health savings accounts was established by the Health Insurance Portability and Accountability Act of 1996.
If you are self-employed, a small business owner, or individual, a tax-advantaged Health Savings Account may be for you. Health Savings Accounts, usually referred to as HSAs, are accounts set up to pay for your health care and allow you to build up savings to pay for future health expenses. HSAs are available in conjunction with a Fortis Health high deductible health insurance plan. Self-employed contributions to the HSA are 100% deductible — just like an IRA (up to the legal limit).
Basically, the HSA is a simple concept. Instead of paying huge premiums to an insurance company to have them pay all your health expenses, you pay a much smaller amount, and have them cover any expenses over a certain amount, such as $2000 per individual per year. You then use the amount you saved to pay your own expenses up to the deductible amount. Because the contributions are 100% deductible, your out of pocket expenses are greatly reduced. HSA funds may also be used to pay for all dental and vision expenses, including orthodontics.
For 2007, the contribution limit is $2850 for single or $5650 for family. If your over 55, an additional $800 may be added.