Does anyone have any experience with the HSA? It's health insurance for the self employed, that you contribute to like an IRA. I've been researching it a bit, still feel baffled, and can't find anyone in my area that really knows how it works.



Does anyone have any experience with the HSA? It's health insurance for the self employed, that you contribute to like an IRA. I've been researching it a bit, still feel baffled, and can't find anyone in my area that really knows how it works.





HSA's are NOT insurance. They are a method of setting money aside 'above the line' on your tax return which can then be spent on medical expenses - which essentially exempts this money from being taxed. This is a major improvement over the standard deal where out of pocket medical expenses (paid with after-tax money) are only tax deductible if they exceed 7.5% of your AGI (I think). The kicker, however, is that money set aside in an HSA can ONLY be used for medical expenses, and if you don't spend everything that you have set aside you wind up losing the unspent money. There are probably a few accounting games that can be played with HSA's which help to minimize this risk, and anything of a routine nature like annual physicals, breast exams, pap smears, 6 month regular dental visits etc. are usually pretty easy to guess at in terms of the actual amount of money needed to pay for them.
HSA's are primarily targeted at employees. Similar de-facto tax free results, without the risk of 'losing' unspent money, can be achieved by setting up a corporation or LLC and having the corporation provide you 100% medical expense 'reimbursement' as a 'fringe benefit'.



Thanks Melonie, your explanation was much clearer than the websites I've visited on the subject!
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