Health Savings Accounts were formed in January, 2004 as part of the Medicare Prescription Drug and Modernization Act. These programs replace Medical Savings Accounts (MSA). In essence HSA’s have removed all of the negative requirements of an MSA and retained the positives.
As with an HRA an employer purchases a high deductible health insurance plan. Health Savings Accounts are then established on a non-taxable basis to reimburse individuals for additional out of pocket liabilities.
Guidelines for an HSA are as follows: