HSAs: Affordability Vehicle or Tax Benefit?

The actual number of uninsured individuals is likely much higher: Individuals who have insurance for only part of the year are not counted as "uninsured" by the survey.

For healthy individuals who can afford to make large contributions, the benefits go beyond medical: After 65 participants can withdraw income -- penalty-free -- and use it on nonmedical expenses.

Money deposited into an HSA can be deposited pretax or claimed as an above the line deduction, earnings grow tax-free and no taxes are taken out when funds are used for qualified medical expenses. Though younger people who withdraw funds for nonmedical expenses are subject to taxes and a 10% withdrawal penalty, people over 65 can use the money for other expenses, and it's taxed only as income.

Essentially, for the healthy, (or for those who get into a more comprehensive insurance plan before they get sick) HSAs can function as something akin to an IRA.

"A health savings account is a good deal and all Americans should consider it," said President Bush in 2003 after signing the legislation which enabled HSAs. "Every year, the money not spent would stay in the account and gain interest, tax-free, just like an [IRA]. And people will have an incentive to live more healthy lifestyles because they want to see their health savings account grow."

Whether the accounts are also helping the people who most need money for medical care remains to be seen.