You're self-employed. Or you're employed but taking a bigger out-of-pocket hit for health care costs.

You're seeing the writing on the wall about full employer health coverage.

And you're hearing a lot about health savings accounts. Long advocated by the Bush administration, HSAs form the core of the new consumer-driven health care movement designed to help us take charge of health care expenses -- and, just maybe, lower them.

The debate continues, however, about whether lower costs will really be the outcome and whether the less fortunate or less healthy will suffer.

The jury's still out on that one, but I do favor consumer-driven health care just as I favor consumer-driven car prices and a whole lot of other things. Consumers need price visibility and choices so they can manage their own expenses and risks.

How does it work? HSAs allow participants to set aside funds in an IRA-like arrangement, in which deductible funds are set aside to meet qualifying health care expenses.

HSAs must be tied to a so-called high-deductible health plan, or HDHP -- that is, a health insurance policy with minimum deductibles of $1,100 (individual) or $2,200 (family) for 2007.

HSAs are evolving and gaining prominence as financial tools. And that evolution just took a quiet but important step forward, so we should all watch closely.

As a last ditch, 11th-hour effort (and I really mean really 11th-hour), the Tax Relief and Health Care Act of 2006 was passed the Friday night before Congress adjourned for the year, and was signed into law Dec. 20.

No doubt this was a last hurrah of the outgoing Republican majority to drive its health care agenda.

But even as the control of Congress has shifted, I believe this adjustment will set the tone for things to come.

Here are the major provisions:
  • Expanded individual contributions.

    Before, if eligible for an HSA, you could contribute (and deduct) only up to the amount of your actual deductible. Now all participants get the full limit, up to $2850 per year for individuals, $5,650 per year for families. And that amount will be indexed for inflation. This is powerful, as I'll show below.
  • Employers can play more, too.

    More employers realize they can save on health insurance costs by buying high-deductible health plans and depositing part of the difference in employee HSAs. The new law expands the power to do that, especially for lower-paid workers. You'll see more employers using HSAs to attract and retain workers.

Click here for the video version of this story from Jennifer Openshaw.

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