It’s pretty much unavoidable these days: the debate on health care. As Congress and the Obama Administration debate a new health care bill, public options, and the like, somewhat lost in the shuffle are a private-market solution to lowering health care costs. Health Savings Accounts, created during the Bush presidency as a way for consumers to plan for some of their own health care bills, are offered by banks and can be supported by your employer, working in conjunction with your health insurance plan. In a future BankShout article, I’ll detail how to choose the best health savings account plan for your own particular situation. For now, let’s look at some basic health savings features and benefits.

Health Savings Accounts? What are they, anyway?

According to the U.S. Treasury Department, Health Savings Accounts (HSAs) are “a special account owned by an individual used to pay for current and future medical expenses.” Basically, an HSA can only be opened in conjunction with a high-deductible health care plan. The idea is for the account owner to earn some interest on funds that can be used toward things like prescriptions, doctor visits, medical procedures–basically anything that your insurance isn’t covering (some “preventative” procedures are excluded) due to your high deductible level.

Who can open an HSA?

You are eligible to open a Health Savings if you meet a bunch of government criteria. First and foremost, you have to be enrolled in a high-deductible insurance plan, plus not be covered by any additional insurance or Medicare. To qualify, you can’t claimed as a dependent on someone else’s tax return, either.

What exactly is a “high deductible?”

The federal government defines high deductible health plans as those with deductibles of $1100 for individual and $2200 for family policies, although these amounts are indexed for inflation, going forward. Out-of-pocket limits also apply.

How does my employer get involved?

Both the account owner (you) and your employer can make contributions to your health savings account. If your employer makes a contribution, it is not taxable to you, which is a huge benefit. HSAs generally pay a higher interest rate than comparable consumer savings accounts, another big plus.

What should I look for in an HSA?

That is a question that will need to wait for a (near) future BankShout post. Because of the enormous tax benefits of an HSA, basically everyone who can open one, probably should. But we’ll take a look at some specific accounts and hypothetical employer health plans and help you gain some more insight. For now, you can read more about HSAs at the U.S. Treasury’s web page here.