Background Paper

Health Savings Accounts: The Fundamentals
April 11, 2005


Beth Fuchs, PhD & Julie A. James, Consultants


This paper explores the fundamentals of health savings accounts (HSAs). While not intended to be an exhaustive review of these accounts, it describes their intellectual and legislative origins and the mechanics of how they work, explores the early returns on how they are faring in the insurance market, and identifies major issues and controversies that they raise. The paper looks specifically at the basic rules for HSAs and the requirements for health insurance that qualifies as a high-deductible health plan (HDHP) for HSA purposes. Also considered are issues related to provider payments under HSAs and the administration of the benefit and the accounts. At the broader level of the health care system, the paper examines how HSAs may affect the employer-based system and whether they may help to increase the number of Americans with health insurance coverage.

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