Health savings account

Also found in: Medical, Acronyms, Wikipedia.

Health Savings Account

A form of health insurance in which a policyholder makes tax-free contributions to a special account that can be used for present and future medical expenses. Health savings accounts may be purchased individually or through an employer, but, in order to qualify for one, a policyholder must have an insurance policy with a high deductible. A health savings account may be used in order to offset the high deductible on one's other insurance policy. One does not pay taxes on withdrawals from a health savings account, unless one withdraws funds for a non-medical reason, in which case there may also be a penalty, depending on the age of the policyholder.

Health savings account (HSA).

A health savings account is designed to accumulate tax-free assets to pay current and future healthcare expenses. To open an HSA, you must have a qualifying high deductible health plan (HDHP) either through your employer or as an individual.

If you have an employer's plan, your contributions to the HSA are made with pretax income, and your employer may contribute as well. If you have an individual plan, you may deduct your contributions in calculating your adjusted gross income (AGI).

Congress sets an annual limit on the amount you can contribute to an HSA, which you set up with a financial institution such as a bank, brokerage firm, insurance company, or mutual fund company that offers these accounts.

No tax is due on money you withdraw from the HSA to pay qualified medical expenses such as doctor's visits, hospital care, eyeglasses, dental care, and medications for yourself, your spouse, and your dependants.

Any money that's left over in your HSA at the end of the year is rolled over and continues to accumulate tax-free earnings, which you can use for future healthcare costs.

Once you're 65, you can use the money in the HSA for non-medical expenses without paying a penalty, but you'll owe income taxes on those withdrawals. If you are younger than 65, you can also spend from your HSA on non-medical expenses, but you'll owe income taxes plus a 10% tax penalty on the amount you take out.

References in periodicals archive ?
Today, these brand attributes remain integral to our larger business model, which is based on our core offering of health savings accounts.
To open a health savings account, a Power Financial employee must be enrolled in the high-deductible health plan.
Even after the owner of a Health Savings Account is no longer covered by a High Deductible Health Plan, money in the account continues to be tax-free as long as it is used for medical expenses.
Glied SA and Remler DK The Effect of Health Savings Accounts on Health Insurance Coverage.
Another worry is that people will opt for the high-deductible insurance, but have nothing to invest in the health savings account to help them pay that large deductible.
Consumer-directed health savings accounts, whose lower premiums and higher deductibles appeal to employers and the young and healthy, are expected to grow rapidly over the next two years after a slow start.
Part of the larger question with a health savings account is whether it's a savings vehicle or a spending vehicle.
However, "a major challenge lies with educating employees on how to use the health savings account.
Yet another tool, the Health Savings Account Comparison Calculator, can help site visitors calculate their potential cost savings with an HSA based on their insurance premiums and medical expenses from the previous year.
Americans were offered an alternative way of purchasing health insurance in 2004; it was called a Health Savings Account.
Employers can match employee health savings account contributions, but less generously than the qualified retirement plan match.

Full browser ?