What is a Health Savings Account (H.S.A.)?
A Health Savings Account (H.S.A.) is an interest checking account designed for individuals who participate in a high deductible health care plan and want to save, pre-tax, for future medical and retiree health expenses. You can use your H.S.A. to pay for current qualified medical expenses that are not covered by insurance.
A high deductible health plan (HDHP) is a plan with a deductible of least $1,350 for individual coverage and $2,700 for family coverage for 2018 and may change annually.
Qualified medical expenses are health-care expenses, as defined by Internal Revenue Code 213(d), that are paid by you, your spouse, or your dependents for the diagnosis, cure, mitigation, treatment, or prevention of disease. These expenses include lab fees, prescription drugs, dental treatment, ambulance service, eyeglasses, and hearing aids, as well as many other health care expenses. Over-the-counter (OTC) drugs are not a qualifying expense. HSA funds may also be used to cover health insurance deductibles and co-payments.
Generally, health insurance premiums, including HDHP premiums, are not qualified expenses, except for the following types of health coverage:
- COBRA health care continuation coverage
- Qualified long-term care insurance
- Health care coverage while receiving unemployment compensation
- Retiree health insurance other than a Medicare supplemental policy (Medigap). This means that if you are age 65 or older, premiums you pay for Medicare Part A, Part B, Part D, or a Medicare HMO, or your share of premiums for employer-sponsored health insurance, including retiree health insurance, can be paid from an HSA.
IMPORTANT NOTE: The HSA trustee or employer is not responsible for ensuring that amounts distributed from an HSA are used for qualified medical expenses. It is your responsibility to ensure that you are using your H.S.A. funds to cover or pay for qualified medical expenses.