How May I Set Up a Medical Savings Account?

Opening a medical savings account, also known as a health savings account, can save you money on your taxes and help you save money for large health care expenses. When you open a health savings account, you receive a tax deduction for the money you contribute, and you have those funds available when you need them. Unlike some other programs, the money in a health savings account does not expire, and you can continue building those funds year after year.

Track Your Healthcare Spending

• Track your health care spending and know where you stand before you open a health savings account. While an HSA can be valuable to any consumer, it is particularly well suited to those whose health care spending is somewhat predictable. Once you know how much you normally spend on health care services during the course of a year, you are in a good position to start funding the account.

High-Deductible Health Plan

• You must have a high-deductible health plan in place before you can open a health savings account. Not all plans qualify as HDHPs, so check with your employer or health care broker to make sure your plan qualifies. To qualify as an HDHP, the plan must carry a minimum deductible of $1,200 for individual coverage or $2,400 for family coverage.

Check with Your Employer

• If your health care plan is through your employer, and it qualifies as an HDHP, the employer may offer a linked HSA you can use to cover the costs related to that high-deductible coverage. In some cases, employers fund part of the annual HSA contribution.

Choose an Administrator

• A number of different institutions offer HSA plans, including banks, mutual fund companies and brokerage firms. When shopping for an HSA, look at any fees involved, as well as any investment choices for the money. Safety is an important consideration for HSA funds, so the money is typically invested in savings accounts, money market funds and similar instruments.