Making the most of that shiny new HSABy Matt Stroud
NEW YORK | Thu Apr 19, 2012 12:34pm EDT
(Reuters) - Health savings accounts
have been around for almost a decade, but lately people have been snapping them up like they are milk and rock salt, and a big snow storm is brewing.
Enrollment in these specialized tax-deductible, tax-free accounts has exploded: In March 2005 there were slightly more than 1 million accounts; a year ago there were 11.4 million, according to America's Health Insurance Plans, a trade group. Since then, the growth has been exponential, with Fidelity Investments saying its HSA business grew 61 percent in a year.
The idea behind these accounts is this: Consumers set aside pre-tax dollars in a special account that they can use for the out-of-pocket medical expenses that arise when they are in high-deductible plans.
Some of that new popularity stems from the growth of lower cost high deductible health insurance plans that are showing up in employer's benefit packages.
But the big tax advantages that these accounts confer on their owners is also significant.