Many people are first attracted to consumer-directed health plans (CDHPs) that feature a health savings account (HSA) simply because the monthly premium is lower than that of the more traditional plan with co-pays. However, if they stop at the premium savings, they are really missing the best part of this unique insurance/savings package – the HSA.

People who select a qualified HSA plan and open a HSA are actually signing up to receive a tax break. Any money deposited into the account is exempt from federal (and most state) income taxes. When funds are payroll-deducted on a "pre-tax" basis, employees and their employers also do not pay FICA taxes on the money contributed to the account.

Individuals, and those whose employers do not make pre-tax contributions an option, may still benefit. Any amount deposited into a health savings account before the tax deadline in April becomes an "above the line" deduction for the previous year's tax return. So that money is not counted as income, and therefore it's not subject to income tax.