Q: What is a Health Savings Account and why should I be contributing money to it?
A: A Health Savings Plan (HSA) is like a savings account made available by your employer that allows you to put money away on a pre-tax basis (it is payroll-deducted before taxes are taken out) to pay for certain medical expenses. This way you can pay for your health care costs (prescription drugs, co-pays for doctor visits, etc.) with money that has not been taxed yet.
Not only is there the tax advantage to using an HSA for medical expenses, but it is also an easy way to save for medical costs. Since it is payroll deducted and put into an account for you, it is built into your budget automatically. The other value to an HSA is that if you do not use the money, it is savings that you can use the next year – and if you never use it for medical needs, the savings is there for your retirement (so it can be a long-term savings account).
In other words, you never lose that money.