A health savings account (HSA) is not health insurance but rather a savings account that is used in conjunction with a high-deductible health insurance policy. An HSA can help save money on out-of-pocket medical costs and provide funds for an insured who has a limited health insurance policy or one that excludes pre-existing medical conditions.

HSAs have been promoted as one way to help control health care costs. By reducing the money spent on care and putting more of the responsibility on individuals, insurers are less at risk.

There are advantages to having an HSA. For example, individuals can deduct HSA deposits on their annual income taxes. If an insured participates in an HSA through his or her employer, deposits may go into the account on a pre-tax basis. And, in some cases, employers may even contribute to employees’ HSA accounts.

But there are a few downsides. First, when money is withdrawn from an HSA for non-medical expenses before the account owner turns 65, those funds are taxed and incur a 10% penalty. Opponents of HSAs worry that the pressure to save and keep money in the account may actually cause individuals to avoid seeking preventive treatment for certain health conditions.

HSAs can be a good health care cost option for some. Prior to opening an account, however, it is important to consider an individual’s specific situation in order to determine whether an HSA will provide a true benefit.