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The Biggest Casualty of Obamacare

Dan Caplinger
September 16, 2009

Amid all the controversy over the administration's health-care proposal, there's one almost-forgotten tax provision that could potentially achieve many of the same goals, including helping people cut costs and take greater control of their health care. What's more, you can already use that provision if you qualify -- but it may soon become a moot point depending on the form a national health-care plan eventually takes.

Understanding health savings accounts
Health savings accounts (HSAs) were created back in 2003. Conceived as a way for individuals to cut their health insurance costs while retaining more responsiblity for covering their actual health expenses, HSAs were designed for use in combination with specialized health insurance policies known as high-deductible health plans or HDHPs.

The idea behind HDHPs is similar to what you may have seen on your homeowners or automobile insurance. Just as you can cut your premium costs by raising your deductible on those policies, HDHPs offer lower monthly premiums. In exchange, rather than covering you from the first dollar of expenses, HDHPs only kick in after you pay a sizable deductible of at least $1,150 for singles or $2,300 for families. Many health insurance companies, including Humana (NYSE: HUM  ) , Aetna (NYSE: AET  ) , and UnitedHealth Group (NYSE: UNH  ) , offer HDHPs.

Once you have a qualifying HDHP, you're eligible to open a health savings account. Although some insurance companies offer both the insurance policy and an HSA to go with it, you can also open HSAs at other financial institutions, such as Wells Fargo (NYSE: WFC  ) , BB&T (NYSE: BBT  ) , US Bancorp (NYSE: USB  ) , and Bank of America (NYSE: BAC  ) .

How HSAs work
The IRS allows you to contribute up to $3,000 for singles or $5,950 for families to your HSA. Those contributions qualify for deductions on your income ta