HSA stands for “Health Savings Account,” and it’s an easy (and smart!) tool for consumers to use in conjunction with their health insurance to save money for healthcare expenses.
Purchase a high deductible health plan; an insurance policy that is properly qualified to work with a health savings account. Your monthly premiums will typically be lower due to the higher deductible. NOTE: The policy must meet specific IRS guidelines (read more by clicking here).
Once your HSA compatible insurance policy is in force, you then are eligible to open the actual savings account at any qualified financial institution (bank, investment firm, etc.). Deposits are tax deductible and withdrawals can be made on a tax-free basis to pay for qualifying medical expenses. Annual limits are imposed on the amount contributed and there is a penalty if funds are used for any non-qualified expense.
Most medical expenses not covered by the underlying HSA compatible insurance policy may still be considered allowable expenses under the health savings account. For example, dental work, including braces, vision care, including glasses, eye surgery, alternative therapies such as acupuncture, etc. can all be paid for with tax-free money from the HSA. Click here for the approved list of IRS-qualified expenses.