Q&A: Health savings account

We offer high deductible health plans (HDHPs) that are compatible with a Health Savings Account (HSA). With our HDHP option, you have the ability and freedom to select where you would like to setup your HSA account.

The health savings account, or HSA, was created by federal legislation in 2003 and allows an individual to set aside pre-tax dollars for qualified medical expenses. The funds can roll over each year, and you can also take them with you when you change jobs. Visit the IRS website for detailed information about HSAs.

Account holders get a triple tax savings
Direct deposits Into HSA accounts are exempt from income tax
Savings continue to grow In accounts tax-free
Money spent on qualified medical expenses are not taxed

Aspirin to x-rays and nearly everything in between. Money from HSAs can be used to pay for a number qualified medical expenses. This includes doctor’s visits, prescriptions, dental and vision care for you as well as your spouse and dependents.

Visit irs.gov for a complete listing of qualified medical expenses.

To be eligible to open or contribute to an HSA, by law you must be enrolled in a federally qualified HDHP plan (HDHP). You cannot be:

Covered by any health plan other than an HDHP
Enrolled in Medicare benefits
Claimed as a dependent on another’s tax return

A qualified HDHP:

Provides coverage for medical expenses.
Has in-network deductible and maximum out-of-pocket amounts within the annual IRS guidelines.
Does not pay any medical expenses (other than preventive) until the deductible is satisfied.

The HSA can be used for qualified medical expenses, as defined by the IRS in section 213(d) of the Internal Revenue Code.

You can establish an HSA on the first day of the month that you have a qualified HDHP and are otherwise an eligible individual. You lose eligibility to establish or contribute to an HSA if you become covered by a health plan other than an HDHP, become enrolled in Medicare, or become a dependent on another individual’s tax return.

Although an existing HSA can be used on a tax-preferred basis for qualified medical expenses, you cannot contribute to the HSA or establish other HSAs unless you become an eligible individual again.

The IRS sets the maximum amount you can contribute to your HSA each calendar year. The contribution amounts set by the Treasury Department are adjusted annually and can be found at the US Treasury website.

As the taxpayer, you are responsible. Neither the health plan nor the HSA trustee or custodian has any obligation to verify that you are using your HSA in accordance with the law.

Prescription drug:

Federal law requires both prescription drug and medical costs to accumulate toward your plan deductible. This means you must pay 100% of your medical and prescription drug costs until the plan deductible is met. Once the plan deductible is met, prescription drug benefits will pay according to your plan design.

Family deductible:

When two or more family members are covered under a qualified HDHP, federal law requires the full family deductible to be satisfied before benefits can be paid. This means one person may be required to satisfy the full family deductible.

However, some HDHP plans are not subject to this restriction. If the HDHP offers a single deductible greater than the IRS qualified HDHP minimum family deductible (e.g., $3,000), benefits can be paid to any person on the policy that has satisfied the single deductible. For additional details, see the IRS website.

Q&A: Health savings account

What is a Health Savings Account (HSA)?

What is the benefit of a HSA?

What can you spend the money on?

Who is eligible to open or contribute to an HSA?

What is a qualified HDHP?

What can the HSA be used for on a tax-preferred basis?

When does eligibility for an HSA begin and end?

How much can be contributed to an HSA?

Who is responsible for ensuring I am eligible for a HSA, monitoring contribution limits and using funds for qualified medical expenses?

Are there any restrictions with a qualified HDHP?