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HSA stands for Health Savings Account. A HSA plan is either a Deductible plan or Deductible-Coinsurance Combination plan. HSA plans premiums are relatively low because their deductibles are normally high.

Here is how HSA plan works. You sign up for a HSA plan. Open an Health Saving Account with your banks or insurance companies. Contribute money to this account. The maximum annual contribution is not limited to the plan deductible and is set by the IRS(2008): $2,900 per individuals or $5,800 per families. Then you use money from this account to pay your deductible and medical expenses.

Below are HSA plan's benefits:
  • Relatively low cost.
  • Contributions are income tax deductible.
  • Use money from this account to pay your deductibles and other medical expenses.Thus you use pretax dollars to pay. This is great benefit to the self-employed.
  • You can elect to invest money in the account. Earnings on the account are tax sheltered.
  • The unused fund can be withdrawn after 65 without penalty but you will be taxed much like tradition IRAs.