Steps for Better HSAs

When you open a health savings account, you have a chance to put money aside to pay for your anticipated health care expenditures. The money you contribute to an HSA also lowers your taxable income and reduces your tax bill, so making the most of the account can benefit you in several ways. Making the most of your HSA means carefully examining your options and choosing the account that best meets your specific needs.

Instructions

• 1

  Verify your eligibility for a health savings account by confirming that your current health plan qualifies as a high deductible health plan. You can verify your HDHP status with the human resources department where you work, or with your insurance broker if you buy an individual plan on your own.

• 2

  Calculate your typical yearly out-of-pocket costs for health care services by reviewing your explanation of benefits forms, canceled checks and other financial documents. Use this figure as a guideline when funding your new HSA.

• 3

  Contact the financial institutions that offer health savings accounts, including banks, brokerage firms and mutual fund companies. Review the terms of each health savings account, including the minimum balance requirement, investment options and any fees that may apply. Choose the health savings account that gives you the best combination of convenience and good value.

• 4

  Fund your HSA with as much as you can afford, making sure that you meet the minimum balance requirement for the plan, and that you will have enough in your account to cover your expected annual expenditures. You get a tax break for the money you put into an HSA, so every extra dollar you invest lowers your tax bill. For 2011, you can contribute up to $3,050 to an individual HSA, or $6,150 to a family plan.

• 5

  Keep the debit card that comes with your HSA in a safe place. You can use this debit card to pay for legitimate health care expenses, but if you use it for non-medical expenses, you must pay a tax penalty.