What is a Health Savings Account (HSA)?
A health savings account, also known as an HSA, is a tax-exempt savings account that, when paired with a Qualified High Deductible Health Plan (QHDHP), can be used to pay for certain medical expenses. Funds deposited are not taxed, nor are withdrawals for qualified expenses.
HSAs have many benefits, like:
- The money you put in your HSA account is tax deductible.
- Funds in your account grow tax-free.
- You don’t pay taxes on withdrawals when paying for qualified medical expenses.
- Your HSA balance can be carried over year after year.
- You may be eligible to invest your HSA similar to a 401K or IRA (in an interest bearing account, a mutual fund or stocks or bonds).
- You can use your HSA to help add to your retirement funds. After you turn 65, you can withdraw funds from your HSA for any reason without penalty.
To use an HSA with your health insurance plan, you need to enroll in a Qualified High-Deductible 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 Qualified. These requirements can change, so be sure to check that your high deductible plan is a Qualified high-deductible plan.
What Can I Pay for Using an HSA?
HSAs may be used to pay for various medical expenses. Here’s a partial list of qualified medical expenses from the IRS (based on IRS Section 213 and listed in Publication 502):
- Health insurance plan deductibles, copayments and coinsurance
- Prescription drugs
- Dental services including braces, bridges and crowns
- Vision care including glasses and Lasik eye surgery
- Psychiatric and certain psychological treatments
- Long-term care services
- Medically related transportation and lodging
- Certain health premiums, including COBRA
Health Savings Accounts (HSAs) from Medical Mutual
Health savings accounts must be administered by a qualified, IRS-approved institution, like a bank or credit union. Setting up and funding an HSA is your responsibility and is separate from enrolling in a qualified high-deductible health plan.
If you enroll in a Medical Mutual HSA-compatible plan, you have the option to set up a Medical Mutual HSA. By doing so, you can manage your account and your health benefits through My Health Plan, our secure member portal. Plus, you won’t be charged any monthly servicing fees.
Through My Health Plan you can manage your HSA and your health plan all in one convenient location through your computer, tablet or smartphone. When you log in, you can:
- Transfer money electronically to fund your HSA
- Upload and record necessary medical receipts
- View your account balances
- Monitor your claims
- Track expenses against your deductible
If you don’t want to open a Medical Mutual HSA, you can open an account with another financial institution, but fees may apply.
Is an HSA Right for Me?
An HSA may be right for you if are willing to set up the account and have money to fund it. Conventional wisdom is to contribute as much as you can, up to the contribution limit ($3,400 for individuals and $6,750 for families in 2017). If you can’t afford to contribute that much, it’s a good idea to contribute anything you can to help you save money down the road.
If you have health insurance through your employer, the company may contribute some money to your HSA. Check with your employer’s Human Resources or Benefits department.
Get more details on HSAs, including tax considerations, contribution limits, and other HSA rules and guidelines in our HSA FAQs.