What is an HSA? | WPS Explains

Saving is nothing new. You use to put pennies in a piggy bank, and likely have at least a little money set aside now. When paying for health care, what if you could keep more of your own money and have more control over where you spend your health care dollars? A health savings account, or HSA, is a special kind of savings account set up to pay for qualified medical expenses. You qualify for an HSA if you choose a type of health plan-called a High-Deductible Health Plan, that is also HAS eligible. Like the name says, these plans have a high deductible, but often come with a lower premium, too. An HSA can be a valuable financial too. When you add to your HSA through a pre-tax payroll deduction, you will not pay taxes on that money. You also will not be taxed on any distributions or interest you earn. You can only spend HSA funds on qualified medical expenses, but that covers quite a few things, from office visits to eyewear to prescription drugs, as well as: Qualified medical expenses your plan doesn’t cover; visits to out-of-network providers. Health plan deductibles, copays, and coinsurance; and COBRA coverage if you leave your job and lose health benefits. You can also use your HSA to pay for qualified medical expenses for your spouse or dependent children not covered by your health plan. One of the best things about an HSA? It is yours, whether you change jobs, become unemployed, or switch insurance carriers. And there is no deadline to spend it, unlike flexible spending accounts. Any while you cannot contribute any more to your HAS after signing up for Medicare, you can use any leftover HSA money to pay for Medicare expenses, including premiums, tax-free. There are some rules. The IRS limits how much you can put in each year. If you use HSA money for non-medical expenses, you will owe income tax on that amount and pay a penalty. Everyone has different health plan coverage needs. Explore all your options to see if an HSA eligible High-Deductible Health Plan is the right fit for you.

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