What is an HSA and how does it work?
An HSA (Health Savings Account) is a tax-exempt account where funds grow to pay for medical expenses. They were created to help give control back to consumers and lower healthcare costs. First, you choose a High Deductible Health Plan (HDHP). Monthly premiums for HDHPs are lower than for traditional health plans. When you combine your HDHP with an HSA, you get lower premiums while building a medical savings account which can be used for many medical expenses not usually allowed by many traditional health plans. HSAs also have a tax favored status – meaning what you contribute is either pre-tax or tax deductible. Interest earned on the money is tax-deferred. Using the money to pay for qualified medical expenses is tax-free. Lower insurance premiums combined with using tax-free money can lead to significant savings, and you can end up with quite a large nest egg. To learn more about HSAs, click here to view the US Department of Treasury brochure, “All About HSAs”: U.S.
