A Health Savings Account (HSA) is a type of personal savings account that can be used to pay for qualified medical expenses. It is a tax-exempt savings account that is available only to people who have high-deductible health insurance plans. Here are some key points about HSA insurance:

Eligibility

• You can contribute to an HSA only if you have an HSA-eligible plan, which is generally a health plan that only covers preventive services before the deductible.
• You cannot contribute to an HSA if you have Medicare coverage or a plan that pays its share of a covered service without you having to pay deductibles or copayments first.

Benefits

• By using untaxed dollars in an HSA to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your out-of-pocket health care costs.
• HSA funds generally may not be used to pay premiums.
• The money you contribute to the account isn’t taxed as long as it’s used for qualified, out-of-pocket medical costs.
• HSA-eligible plans may have a lower monthly premium but have a higher out-of-pocket health care costs before the insurance plan pays.
• Your HSA balance rolls over year to year, so you can build up reserves to pay for health care items and services you need later.

Drawbacks

• You must have a high-deductible health insurance plan to get an HSA, which means you will be responsible for coming up with the cash to pay for your deductible before your insurance plan begins paying your healthcare costs.
• Withdrawals that are not used for qualified medical expenses are subject to income tax and a 20% tax penalty, unless the person is age 65 or older.

HSAs are offered by banks, credit unions, and other financial institutions. To set up an HSA, you can contact your employers HR department or your insurer.