If you’re looking for a flexible health plan option that provides extra support when paying for medical expenses and additional tax-advantages, a health savings account (HSA) paired with a high-deductible plan might be the right choice for you.

What is a Health Savings Account?

An HSA is a tax-advantaged personal savings account designed to help you pay for qualified medical expenses like doctor visits, prescriptions, dental and vision care, medical supplies, and hundreds of other IRS-approved health expenses. They also allow you to set aside pre-tax income, which can grow tax-free, and unused funds roll over year to year. The account stays with you, even you change jobs.

Who Qualifies for an HSA?

Anyone covered under an HSA-qualified High-Deductible Health Plan can sign up, but you cannot be enrolled in Medicare or claimed as a dependent on another person's tax return. Many ACA Bronze plans qualify because they are high-deductible plans. Depending on how your benefits are set up, some plans may also include additional perks like no-fee accounts or cash incentives.

What are Some Advantages to an HSA?

• SECURITY – Your HSA can provide a savings buffer for unexpected or high medical bills.
• AFFORDABILITY – In most cases, you can lower your monthly health insurance premiums when you switch to health insurance coverage with a higher deductible and HSA.
• FLEXIBILITY – You can use your HSA to pay for current medical expenses, including your deductible and expenses that your insurance may not cover, or you can save your funds for future medical expenses.
• CONTROL – You make the decisions about how much money you put into the account, when to add to it, and whether you use the account for current medical expenses or future ones.
• TAX SAVINGS – An HSA provides you with triple tax savings including tax deductions when you contribute to your account, tax-free earnings through investment, and tax-free withdrawals for qualified medical expenses.
• PORTABILITY – Even if you change jobs, change your medical coverage, become unemployed, or move to another state, your HSA moves with you.

What Happens to Your HSA Funds If You Don’t Use Them?

Funds remain in your account from year to year, just like an IRA. There are no “use it or lose it” rules for HSAs, making it a great way to save money for future medical expenses. Withdrawals for non-medical expenses before age 65 are subject to taxes and a penalty. After age 65, non-medical withdrawals are allowed without penalty, though they will be subject to regular income tax applies.

What’s the Difference Between an HSA and a Flexible Spending Account (FSA)?

Both Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are types of tax-favored accounts designed to help individuals save for qualified medical expenses. But one of the critical differences is the contribution limits and flexibility offered by each account. HSAs usually have higher contribution limits compared to FSAs, allow funds roll over at the end of the year, and grow through investments, whereas FSAs have stricter spending timelines.

If you have more questions about an HSA, please contact our sales team at (888) 535-4831 or at sales@sanfordhealth.org.