NCPA - National Center for Policy Analysis


April 2, 2007

Health savings accounts (HSAs) allow workers and their employers to fund the tax-free accounts, with withdrawals used for copays at doctors' offices, prescription and nonprescription medicines, and hospital services not covered by insurance.

Because unused balances in the HSAs can be rolled over from year to year, some financial advisers are suggesting that the accounts can be a way for families to accumulate money to be used to cover health care costs in retirement, including Medicare deductibles and long-term care insurance.

According to JoAnn Mills Laing, author of "The Consumer's Guide to HSAs,":

  • There were 3.6 million HSA accounts at the end of 2006 with $5.1 billion in deposits, up from 1.1 million accounts with $1.2 billion in deposits at the end of 2005.
  • She predicts further growth, in part because more companies are offering high-deductible insurance plans to their workers; these plans are less costly for employers and employees than traditional health policies but still give workers coverage for medical catastrophes.

"Employees who hadn't been able to get insurance coverage are enthusiastic if they can high-deductible policies because it gives them peace of mind," says Laing.

She pointed out that in addition to payments related to Medicare and long-term care insurance, seniors can use HSA dollars for chiropractic sessions, nursing services, dental care and glasses.

Source: Eileen Alt Powell, "Health Savings Accounts can do double duty as backup for insurance," Associated Press/Washington Observer, April 2, 2007.


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