Why do people enroll in these medical savings accounts? There are many reasons, but the bottom line is that it can save them money. Individuals who choose their own health plans can choose a high-deductible plan and then pay the deductibles pre-tax, thereby saving on premiums. It is the tax savings, however, that most people are going for when they sign up for a medical savings account.

To qualify for a Health Savings Account, you need to be covered under a High Deductible Health Plan, or HDHP. The HDHP is going to cost less than traditional health insurance. You then put the money you save on insurance into your HSA.

A HDHP is also known as a “catastrophic” health insurance plan. These inexpensive medical insurance plans usually don’t pay for the first few thousand dollars of your medical expenses in a year. They usually do cover you after that. That’s known as your “deductible.”

To qualify for an HSA, your deductible has to be $1,100 or more for an individual or $2,200 or more for a family. Your annual out-of-pocket amount on the plan can’t exceed $5,600 for an individual or $11,200 for a family.

You own the money in your HSA, and you control it. You choose how to spend it, without relying on a health insurance company or third party. You also decide what kinds of investments to make with the money in your HSA to help it grow.

You can sign up for an HSA through many different companies. Banks, credit unions, insurance companies and others may all offer HSAs. Even some employers set up HSA plans within their own company.

An HSA doesn’t cost you anything to purchase. Instead, it is something like a savings account. You deposit money into that account on a tax-preferred basis. You do purchase the High Deductible Health Plan, of course, but you don’t truly “purchase” the HSA.

Finally, it’s worth noting that an HSA differs from other types of medical reimbursement accounts. For example, some companies offer Flexible Spending Arrangements or Health Reimbursement Arrangements. While you may be able to have these as well as an HSA, in many cases having one will disqualify you from having an HAS. It depends on the specifics of the other type of plan as to whether you can have both.

The U.S. Treasury website has all sorts of useful information about HSAs, about who qualifies and about how they work in terms of your taxes.