All About Health Savings Accounts (HSA)
A Health Savings Account, also known as an HSA, is a tax-advantaged account that is used in combination with an HSA-qualified high deductible health insurance plan. The money you put into your Health Savings Account can help pay your health insurance plan’s annual deductible, as well as any other qualified medical expenses (including coinsurance) that may not be covered by your health insurance plan after you meet your deductible.
Some of the benefits of an HSA include:
- Pre-tax contributions1: If you are an HSA eligible individual, you can make tax-free contributions to your HSA, up to the statutory maximum.
- Tax-free growth: The interest that you earn on your HSA balance is generally tax-free.
- Tax-free withdrawals: Withdrawals are tax-free when HSA funds are used for qualified medical expenses.
- Portability: Your HSA stays with you, even if you change employers or health plans.
- Investment flexibility: Most banks offer a variety of investment options including stocks, bonds, mutual funds and money market funds.
An HSA can be the "right fit" for:
- Early retirees who want to use tax-advantaged dollars to pay for their health care expenses in their retirement. An HSA eligible individual age 55 or older can make catch-up contributions to his or her HSA.
- Self-employed individuals who welcome affordable benefits and the ability to invest with their HSA
- Professionals who want to use tax-advantaged dollars to pay for qualified medical expenses
- Young individuals and families who may be less likely to have significant medical expenses associated with major illnesses but would like to save for future medical expenses
- Small employers (those with fewer than 10 employees) looking for an affordable option for their employees
- Working uninsured seeking lower insurance solutions
1 Health Savings Accounts (HSA) have tax and legal ramifications. Blue Cross and Blue Shield of Illinois does not provide legal or tax advice, and nothing herein should be construed as legal or tax advice. These materials, and any tax-related statements in them, are not intended or written to be used, and cannot be used or relied on, for the purpose of avoiding tax penalties. Tax-related statements, if any, may have been written in connection with the promotion or marketing of the transaction(s) or matter(s) addressed by these materials. You should seek advice based on your particular circumstances from an independent tax advisor regarding the tax consequences of specific health insurance plans or products.