A High Deductible Health Plan (HDHP) is a qualified plan offered by an insurance company, for example, PerfectHealth. An HDHP has lower premiums. Your HSA and HDHP go together to help you pay for health costs before your deductible is reached.
A Health Savings Account (HSA) is a special kind of tax-advantaged savings account used to pay medical expenses such as deductibles, copayments, and over-the-counter medication. The money in your HSA can be used to pay for health care expenses until your high deductible health plan begins paying benefits. You must be enrolled in a qualified HDHP to open an HSA. Deposits to your HSA are tax deductible, interest earned is tax free, and withdraws to pay for qualified medical expenses are tax free.
Qualified medical expenses include: medical insurance deductibles and copays, dental and vision care expenses, and over the counter drugs, premium payments for COBRA coverage, long term care insurance, and Medicare supplement premiums and associated out of pocket expenses.
All of the money you accumulate in an HSA is yours to keep. Unlike flexible spending accounts (FSA) or medical savings accounts (MSA) there is no "use it or lose it" provision with an HSA. The money in your HSA rolls over from year to year, earning interest, so you can use the money from your HSA to pay for both current and future health care expenses. Funds withdrawn for non-qualified expenses will be taxable and you may be subject to a 10% penalty.
Getting reimbursed for medical expenses from your HSA is easy. You can access your HSA funds with a special debit card or checks drawn on your Health Savings Account.
We recommend keeping your records for at least 3 years, but you should check with your accountant annually to find out what the current record keeping rules are.
For more answers, please see the FAQ section of our website.
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