HSA Frequently Asked Questions

What is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSA’s enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.
You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSA’s. An HDHP generally costs less than traditional health care coverage. The money saved on insurance can therefore be put into the Health Savings Account.

You own and control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.

What is an HSA-qualified High Deductible Health Plan (HDHP)?

You must have coverage under an HSA-qualified “high deductible health plan” (HDHP) to open and contribute to an HSA. Generally, this is health insurance that does not cover first dollar medical expenses. Federal law requires that the health insurance deductible be at least:

$1,200* — Self-only coverage
$2,400* — Family coverage

In addition, annual out-of-pocket expenses under the plan (including deductibles, co-pays, and co-insurance) cannot exceed:

$5,950* — Self-only coverage
$11,900* — Family coverage

In general, the deductible must apply to all medical expenses (including prescriptions) covered by the plan. However, plans can pay for “preventive care” services on a first-dollar basis (with or without a co-pay). “Preventive care” can include routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, pap smears, etc.

How do I get a quote for a personal High Deductible Health Plan?
Click here for a free quote.

How do I get a quote for a group High Deductible Health Plan?
Click here for a free quote.

How much can I contribute to my HSA each year?
Beginning in 2010, your maximum annual HSA contribution is $3,050 for a single & $6,150 for family, no matter what your HDHP deductible is. Before 2006, the contribution could not exceed the deductible of your HDHP. If you are age 55 or older, you can also make additional “catch-up” contributions up to $1000 dollars.

Do my contributions provide any tax benefits?
Your personal contributions offer an “above-the-line” deduction. An “above-the-line” deduction allows you to reduce your taxable income by the amount contributed to your HSA. You do not have to itemize your deductions to benefit. Contributions can also be made to your HSA by others (e.g., relatives). However, you receive the benefit of the tax deduction.

Can I make contributions through my employer on a “pre-tax” basis?
If your employer offers a “salary reduction” plan (also known as a “Section 125 plan” or “cafeteria plan”), you (the employee) can make contributions to your HSA on a pre-tax basis (i.e., before income taxes and FICA taxes). If the contributions to your HSA are pre-tax, you cannot take the “above-the-line” deduction on your personal income taxes.

May a self-employed person contribute to an HSA on a pre-tax basis?
No. Self-employed persons may not contribute to an HSA on a pre-tax basis and may not take the amount of their HSA contribution as a deduction for SECA purposes. However, they may contribute to an HSA with after-tax dollars and take the above-the-line deduction.

How do I know what is included as “qualified medical expenses”?   Unfortunately, we cannot provide a definitive list of “qualified medical expenses”. A partial list is provided in IRS Pub 502 (available at www.irs.gov). There have been thousands of cases involving the many nuances of what constitutes “medical care” for purposes of section 213(d) of the Internal Revenue Code. A determination of whether an expense is for “medical care” is based on all the relevant facts and circumstances. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. The determination often hangs on the word “primarily.”

Who will be the “bookkeeper” for my HSA?
It is your responsibility to track all deposits and expenditures from your HSA and keep all receipts to verify the expenses were qualified medical expenses.

What happens if I don’t use the money in the HSA for medical expenses?
If the money is used for things other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% tax penalty.

What are examples of preventive care services?
Preventive care services can include, but are not limited to, routine pre-natal and well-child care, child and adult immunizations, annual physicals, mammograms, and pap smears.

Are dental and vision care qualified medical expenses under a Health Savings Account?
Yes, as long as these services are deductible under the current rules. For example, cosmetic procedures, like cosmetic dentistry, would not be considered a qualified medical expenses.

Can I use the money in my HSA to pay for medical care for a family member?
Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent without tax penalty. This is one of the great advantages of HSA’s.

How do I use my HSA to pay my physician when I’m at the physician’s office?
If you are still covered by your HDHP and have not met your policy deductible, you will be responsible for 100% of the amount agreed to be paid by your insurance policy to the physician. Your physician may ask you to pay for the services provided before you leave the office. If your HSA custodian has provided you with a checkbook or debit card, you can pay your physician directly from the account. If the custodian does not offer these features, you can pay the physician with your own money and reimburse yourself for the expense from the account after your visit. If your physician does not ask for payment at the time of service, the physician will probably submit a claim to your insurance company, and the insurance company will apply any discounts based on their contract with the physician. You should then receive an “Explanation of Benefits” from your insurance plan stating how much the negotiated payment amount is, and that you are responsible for 100% of this negotiated amount. If you have not already made payment to the physician for the services provided, the physician may then send you a bill for payment.

What happens to the money in my HSA if I lose my HDHP coverage?
Funds deposited into your HSA remain in the account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for any months during which you are no longer covered by an eligible HDHP. If you have HDHP coverage for less than a year, the annual maximum contribution is reduced. If you made a contribution to your HSA for the year based on a full year’s coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again.

Do unused funds in a Health Savings Account roll over year after year?
Yes, the unused balance in a Health Savings Account automatically rolls over year after year. You won’t lose your money if you don’t spend it within the year.

Can I pay my health insurance premiums with an HSA?
You can only use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or have COBRA continuation coverage through a former employer.

Can I purchase long-term care insurance with money from my HSA?
Yes, if you have tax-qualified long-term care insurance.  However, the amount considered a qualified medical expense depends on your age.  See IRS Publication 502 for the amounts deductible by age.