Health Savings Account - HSA

Health insurance (even if you have it) doesn't cover everything. Unless you have the Ultimate Platinum Package with Maximum Add-Ons, your policy will have some holes in it...some out-of-pocket expenses. These can take the form of copays and deductibles. Or they can be items completely outside the purview of the policy.

Enter Health Savings Accounts. They provide a way to pay for those incidental or uncovered medical expenses.

Think: 401k-ish savings vehicle, just applied to annual healthcare needs rather than retirement. An HSA is basically a pot of cash where you can set aside funds for medical expenses. The government gives you tax incentives on the cash put into the accounts, meaning you get a little bit of a break on the money you set aside.

It's the beginning of the year. You set aside $1,500 for your HSA. Your employer takes cash out of your paycheck over a period of time to cover the amount in the account.

An expense comes up (say, $200 for a doctor consultation about the dangerously expanding tufts of hair growing just inside your ears). You pay for it out of pocket, but then submit the receipt (along with the appropriate paperwork) for reimbursement. When the expense is approved, you'll get a reimbursement, and the $200 will be withdrawn from your HSA. Now you have $1,300 left.