Health Savings Accounts

A Health Savings Account (HSA) is an alternative to comprehensive health insurance; it is a savings vehicle that allows people a different way to pay for their health care. The HSA enables you to contribute funds on a pre-tax or tax-deductible basis, which you may use to pay for eligible medical expenses (see more on eligible expenses below).  Health Savings Accounts are tax-favored accounts set up with banks and certain other qualified financial institutions. These accounts are designed to pay current medical expenses and to build savings to pay for future medical expenses.

Use your HSA in conjunction with traditional health insurance policies that are qualified as High Deductible Health Plans (HDHP), or plans with a minimum deductible of $1,200 for individuals and $2,400 for families.

Annual HSA Contributions, which can be made either by an individual or by that individual’s employer, are tax deductible. Distributions for qualified medical expenses are not included in individual taxable income, and the earnings of HSA assets are not taxed.

 

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Reasons people buy...

With an HSA, you are in control! You own and you control the money in your HSA. You decide how to spend the money without a health insurance company telling you what to do. You also decide what types of investments to make with the money in the account in order to make it grow.



HSA Contribution Limits
2012 Limits Single Family
Minimum Deductible $1,200 $2,400
Maximum Out-of-Pocket Expenses $6,050 $12,100
Contribution Limit $3,100 $6,250
  • People ages 55 to 64 can make an additional catch-up contribution of $1,000 for individual policies.
  • Contributions by individuals are deductible from gross income.
  • Employers may set up HSA's for their eligible employees and contribute to them, subject to the dollar limits above. Employer contributions are excluded from employees' taxable income.
click here to request your hsa form

Eligible Medical Expenses

To avoid taxation, any HSA distribution must be for qualified medical expenses, which include:

  • Amounts paid for medical care for the account holder or his or her spouse or dependent, who are not reimbursed by insurance;
  • COBRA health insurance premiums; qualified long-term care insurance premiums; and other health insurance premiums, but only if the individual is receiving unemployment compensation.

Individuals can cash out their HSAs for purposes other than medical expenses, but these distributions are subject to both income tax and a 10 percent penalty tax if received before age 65 (except in cases of disability or death). Unused amounts in one year can be carried over to following years and added to subsequent contributions.

 

In general, your HSA can be used for:

  • Expenses applied to your health plan deductible
  • Dental care services
  • Vision care services
  • Prescription services
  • Over-the-counter medications prescribed by your doctor*
  • Certain medical equipment



*IMPORTANT: As of 2011, your HSA may no longer be used for 
over-the-counter drugs, unless they are prescribed by your doctor.