Health Savings Accounts Overview

What is a Health Savings Account? The health savings account, or HSA, is an account that you can contribute to on a per-pay-period basis. The money in a HSA is deposited tax-free, accumulates tax-free and can be withdrawn tax-free for qualified medical expenses. The HSA is a savings account that secures dollars in a fund for future medical needs, and helps meet the deductible on one’s health insurance plan, should something happen that takes medical expenses beyond what is readily affordable.

Who is Eligible for a HSA? You are eligible to contribute to a HSA if you are: Covered by a High Deductible Health Plan (HDHP) ; Not covered under another medical plan that is not an HDHP; Not entitled to Medicare benefits; or Not eligible to be claimed on another person’s tax return.

Why Should I Participate in a HSA? The money deposited into a health savings account is tax-free, as long as it is used for qualified medical expenses. Health Savings Accounts can be an excellent savings vehicle for future medical expenses or for medical care during retirement. The money in your HSA account earns interest. The money in your HSA can be taken with you even if you leave the company. Unlike flexible spending accounts, the funds in a HSA roll over from year to year. Because a HSA is a “cash” account, it empowers consumers with an option to negotiate pricing on many medical services, which can lead to substantial savings on medical expenses. For example, standard imaging services can vary widely in price depending on location and payment method.

How Much Can I Contribute to a HSA? Contribution Limits – $3,350 for Employee-only coverage – $6,750 for Family coverage Contribution Limits For Age 55+ – Individuals age 55 and older can make “catch-up” contributions up to $1,000. You may change your per-pay-period contribution to your HSA at any time.

How Do I Utilize the Money in My HSA? Once the medical claim has been processed, if applicable, out-of-pocket expenses will be billed. At this time you may choose to use your HSA debit card or HSA checks to pay for any out-of-pocket expenses, or you may choose to pay with your own money and receive reimbursement at a later date. You should always ask that your medical claim be submitted to the health plan before you seek reimbursement from your HSA. This procedure will ensure that provider discounts are applied. Also, remember to keep all medical receipts and Explanation of Benefits (EOBs) in case of an audit by the IRS.

What Can I Use My HSA Funds For? Any “qualified medical expense” permitted under federal tax law (IRS Publication 502). Qualified medical expenses include most medical care and services, dental and vision care.IRS Publication 502 Any qualified medical expense for yourself, your spouse or your dependent children, even if they are not covered by a high-deductible health plan. Over-the-counter drugs are not eligible for HSA reimbursement. COBRA Premiums Medicare deductibles and other out-of-pocket expenses

Frequently Asked Questions Can I have both a medical flexible spending account and a health savings account? – You can have a medical flexible spending account AND a health savings account. – If you choose to have both, you may only use the medical flexible spending account for dental and vision expenses. What happens if I pay for something other than a qualified medical expense with my HSA funds? – The money would be taxed as income and subject to an additional 20% penalty. – After age 65, the additional penalty would not be assessed.