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Questions to Ask About a Health Savings Account

A Health Savings Account (HSA) is an account that provides consumers with an alternative to traditional health insurance plans. Funds for an HSA are taken from a consumer's paycheck and placed into a type of savings account that is used to pay for the consumer's healthcare costs. The HSA can also be used to save for future qualified medical and retiree health related expenses on a tax-free basis.

  1. How Do I Enroll in an HSA?

    • A variety of options are available for consumers who are interested in enrolling in an HSA. Options are available through a number of banks and credit unions, as well as through insurance companies and additional companies approved by the US Department of Treasury. Many employers will also offer employees the option of an HSA when enrolling for the company's health insurance policies. In order to open the HSA, a consumer must also have a High Deductible Health Plan (HDHP). A HDHP is known as an inexpensive health insurance plan that has a high deductible that will not cover healthcare expenses until the deductible of several thousand dollars is met.

    How Does an HSA Work?

    • Contributions to an HSA can be made in a number of ways. The owner of the HSA can make direct contributions through direct deposit or through a lump sum deposit at the institution that holds the account. An employer may also contribute to an employee's HSA. Consumers can use the funds in an HSA to pay for qualified medical expenses, including those not covered by the HDHP. For example, the funds in an HSA can be used to cover the cost of an over-the-counter medication, while a health insurance plan will not. Consumer may also the funds in an HSA to cover costs for dental and vision care.

    What are the Requirements for the HDHP?

    • As of 2010, a consumer must have minimum coverage under the HDHP before opening a HSA. The minimum deductible for self-only coverage must be at least $1,100; family coverage plans must have a minimum deductible of $2.200. Annual out of pocket costs under a HDHP are also capped at a maximum of $5,600 for self-only coverage plans and $11,200 for family coverage. Annual out of pocket costs consist of deductibles and required co-pays. High Deductible Health Plans are typically cheaper than standard insurance policies, thus giving consumers the opportunity to place the savings in their Health Savings Accounts.

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