Health Savings Accounts (HSAs)

What Are Health Savings Accounts?

• HSAs were created to offer individuals a tax-advantaged way to pay for qualified medical expenses.
• Also, by making consumers part of the healthcare purchasing decision, HSAs are expected to reduce the continuing growth of healthcare costs.

HSAs represent a breakthrough strategy that may lower healthcare costs and increase retirement savings for future health care, even if you leave your present employer.  HSAs must be combined with a qualified high deductible health insurance plan.  There are several other caveats, but HSAs may be a cost effective alternative to traditional health plans.

HSAs have two parts:

1. A high-deductible health plan (which costs less than traditional copay plans);
2. A tax-advantaged, portable savings account to pay for medical expenses - which builds like an IRA.

All healthcare services (except preventive care) are subject to the deductible.

• HSAs do not include prescription drug copays.  Prescriptions are subject to the health plan deductible (copays may apply after the deductible is met).
• HSAs do not include physician office visit copays.  These services are subject to the health plan deductible.  Preventive services are not subject to the deductible.

Similar in many respects to IRAs and 401(k) plans, the tax advantages of HSAs make them a "better rainy day fund" because contributions can be taken out as needed for medical expenses before retirement.  Remaining dollars can be saved for spending in future years, and/or invested to accumulate tax-free savings for your retirement.

Health Savings Accounts (HSA) Basics

• HSAs can only be used in combination with a qualified high deductible health insurance policy.
• HSA contributions are from pre-tax dollars, and can be made by an employer, employee or both.
• HSAs do not include prescription drug copays.  Prescriptions are subject to the health plan deductible (copays may apply after the deductible is met).
• HSAs do not include physician office visit copays.  These services are subject to the health plan deductible. Preventive services are not subject to the deductible.
• HSAs are portable benefits, controlled and owned by individuals/employees.
• HSAs can "roll over" from year to year as accumulated tax-free savings.
• HSA payouts for qualified medical expenses are tax-free.
• HSA interest and dividends are tax-free until retirement.
• HSAs are an inheritable asset.
• HSAs will encourage participants to become better health care consumers.