|How does a Health Savings Account work?|
A Health Savings Account is a savings account designed to help consumers save and pay for their healthcare expenses on a tax-advantaged basis. Funds can be deposited by consumers into the account on a tax-free basis and may be withdrawn without tax consequences to pay for qualified medical expenses. Employers may also deposit money into an employee's Health Savings Account on a tax-free basis. Funds in the account may be invested and earnings will not be taxed, and unused money will roll over from year to year.
Health Savings Accounts may only be used in conjunction with HSA-compatible health insurance plans. These health plans typically have lower monthly premiums and higher deductibles than other types of health insurance plans. Funds from the Health Savings Account may be used to pay for qualified healthcare expenses accruing toward the deductible. Once the deductible is met, coverage under the HSA-compatible health plan pays for covered expenses (subject to co-payments) for the remainder of the year.
Health Savings Accounts, used in combination with HSA-compatible health insurance plans, give consumers control over how their healthcare dollars are spent, and provide a valuable means of saving and investing for healthcare needs and for retirement.