what is a health savings account (hsa)?
a health savings account, also known as an hsa, is a tax-exempt savings account that, when combined with a qualified high deductible health plan (qhdhp), can be used to pay for certain medical expenses . funds deposited are not taxed, and neither are withdrawals for qualified expenses.
To use an HSA with your health plan, you must enroll in a QHDP, also known as an HSA-Compatible Health Plan. It’s important to know that not all high deductible health plans are qualified. The Internal Revenue Service (IRS) defines what makes a plan qualify. these requirements may change, so be sure to verify that your high deductible plan is a qualified high deductible plan.
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what are the benefits of having an hsa?
hsas has many benefits, such as:
- money comes in tax-free. your hsa contributions are made on a pre-tax basis, making the savings immediate. Your HSA contributions are also tax deductible.
- money comes out tax-free. eligible health care purchases can be made tax-free when using the hsa. Purchases can be made directly from the HSA account, either using a health care debit card (if included with your HSA), ACH, online bill pay, or check; Or you can pay out of pocket and reimburse yourself from your HSA.
- earn interest, tax-free. interest on hsa funds grows tax-free. Unlike most savings accounts, interest earned on an HSA is not considered taxable income when the funds are used for eligible medical expenses.
- Your HSA balance can be carried over from year to year. Unlike a flexible spending account (FSA), an HSA is not a use-it-or-lose-it account. your balance can continue to grow year after year.
- An HSA balance may be invested. Depending on your HSA, you may be eligible to invest your HSA similar to a 401k or IRA, in an interest-earning account, a mutual fund, stocks, or bonuses.
- You can use your HSA to increase your retirement funds. After you turn 65, you can withdraw funds from your HSA for any reason without penalty.
- health insurance plan deductibles, copays and coinsurances
- prescription drugs
- dental services including braces, bridges and crowns
- eye care, including eyeglasses and lasik eye surgery
- psychiatric treatments and certain psychological treatments
- long-term care services
- transportation and accommodation for medical reasons
- certain health premiums, including charges
how do I set up an hsa?
To set up an HSA, contact your employer’s human resources department to see if they have an arrangement or if they can suggest a financial institution that offers HSAs. Your insurer may also recommend or offer an HSA
Most major financial institutions can offer HSAs, so you may be able to open an HSA through your bank. Make sure you understand what fees, if any, will be charged for account maintenance. Medical mutual members who are enrolled in a qhdhp and select the medical mutual hsa are not charged monthly administrative fees.
Once you’ve enrolled in a qualified high-deductible health plan and chosen where you want to set up your account, you can complete the application process and set up funds for the account. The rules and guidelines for contributing to your HSA are described in more detail in our HSA FAQs.
what can i pay using an hsa?
hsas can be used to pay for various medical expenses. Here is a partial list of IRS Qualified Medical Expenses (based on IRS Section 213 and listed in Publication 502):
health savings accounts (hsas) of medical mutual societies
If you enroll in a mutual medical hsa compatible high deductible health plan, you have the option of establishing a mutual medical hsa. The Medical Mutual HSA provides a more efficient and affordable way to manage your health care benefits and your HSA. The Medical Mutual HSA has no monthly administrative fee and is managed by a team based in Ohio.
Through My Health Plan, Medical Mutual’s secure member website, you can manage your HSA and health plan in one convenient location using your computer, tablet or smartphone.