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Can a Health Savings Account Be Prefunded?

A health savings account (HSA) can only be issued with a high deductible health insurance policy. This type of policy has a high initial deductible that you must meet before health insurance coverage begins. The minimum amount of the deductible is $1200, and the policy cannot have any additional co-payment or co-insurance costs once you have reached the deductible.

  1. Contributing to a Health Savings Account

    • You can set up a health savings account at most banks, or your employer might set one up for you. There is an annual contribution limit of $3,050 for individuals and $6,150 for families, and these contributions are tax-free. However, if you withdraw the money to pay for things other than your medical expenses you will be charged penalties. The unused money will roll forward into the next year, which means that HSA accounts can be prefunded from last year's contributions. Additionally, you have the option to contribute the money all at once or break it up into smaller contributions throughout the year.

    Using the HSA

    • You can access you HSA account to pay for the cost of your deductible or prescription medication. Your bank may issue you a debit card, which allows you to make payments to your doctor or pharmacist directly from the account. Alternately, the bank may require you to submit your receipts or preapproval paperwork and then transfer the money into your account or issue you a check for the amount of the payment.

    Rolling Over Funds

    • If you do not use the entire amount you have contributed in previous years to your HSA account, the amount will roll over into the next year; this can continue indefinitely. If you have reached your deductible limit for the year, you may choose to contribute only as much as is needed to pay for your ongoing medical bills. If your deductible is higher than the contribution limits, you will need to set aside money in another account to pay for the difference.

    When to Stop Making Contributions

    • If you have the entire deductible amount in your health savings account, you may choose not to make any further contributions until you use the money. Since you are allowed to make contributions as a lump sum or as smaller amounts, you may choose to wait until the end of the year and then bring the amount back up the annual deductible limit. However, if your deductible is higher than the annual contribution limit it makes sense to contribute even on years you do not need to in case you incur higher medical expenses the next year.

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