As the cost of health care continues to rise, Health Savings Accounts, or HSAs, are one way to control costs, both from an individual and business standpoint.

Health Savings Accounts encourage participate members to take an active role in utilizing their health care benefits by being able to choose how they spend their HSA health care dollars. When patients make health care decisions based on cost, quality, and priority, health care monies are spent more efficiently. In addition, patients are more engaged in their own health, which translates to an increased focus on preventative care. Over time, this helps decrease not only their own medical expenses, but the health care costs for society as a whole.

What is a Health Savings Account (HSA)?

Designed to help with paying medical expenses, an HSA is a savings account for your medical bills. The benefits of an HSA include:

* Tax benefits. Contributions made to an HSA are set aside pre-tax and are fully deductible up to the limit stipulated by law. In addition, withdrawals made to pay qualified medical expenses are exempt from tax. Lastly, interest earned on funds in the account accumulate tax-deferred.

* Unused money rolls over. Unlike a Flexible Spending Account (FSA), dollars that are unused in an HSA aren't lost at the end of the year. Instead, the money rolls over to the following year, where it continues to grow on a tax-deferred basis. The money in an HSA account rolls over, even if you change employers or health care plans. If you remain healthy, funds in the account continue to grow, and can be used as a supplement to retirement.

In order to get the most mileage out of your Health Savings Account, follow these practical tips:

1. Take advantage of payroll deduction. If your company has a payroll deduction plan, your employer can deduct money from your paycheck pre-tax and deposit into your health savings account.
2. Take advantage of a Visa or Mastercard debit card. If your company has an arrangement with Visa or MasterCard tied to an HSA account, signing up for the program means that you can use this debit card to pay for eligible medical expenses. Using a card earmarked just for paying medical expenses helps you to be more organized with spending of your health savings accounts dollars.
3. Know eligible medical expenses. There's a long list of expenses that are eligible to paid out of your health savings account. Refer to your plan administrators listing of HSA eligible expenses, the IRS, or check with your accountant for a complete list of medical expenses that you can pay with dollars accumulated in your health savings account. IRS Publications 969 and 502 have information on health savings accounts and medical expenses, respectively.
4. Keep good records. Because a health savings account is a tax-favored account, you'll need to keep good records -- just like you do for your federal, state, and local tax returns.
5. Invest it. If your employer has the ability to tie your HSA to an investment vehicle, then consider doing so. Today's HSA accounts enable you to put your money in everything from a conservative savings account to a diversified mutual fund to a blue chip stock.

A Health Savings Account is a tool that bestows many advantages to individuals and employers alike. It provides tax benefits and can be a great investment vehicle.