What Are Health Savings Accounts (HSAs)?

What Are Health Savings Accounts (HSAs)?
HSAs represent a significant innovation and option available to healthcare purchasers (see “HSAs Work, Here’s Why”). An HSA is similar to 401K for your healthcare expenses. Set up as tax-free accounts, HSAs are designed to help your employees save for their health expenses. HSAs have two parts:

1. A high-deductible health plan (HDHP) that covers large hospital and healthcare bills
2. A bank/investment account to pay medical expenses up to the level of the deductible.

Any unspent money accumulates in an HSA from year to year, earning investment income tax free, and is available to pay for certain “Eligible Medical Expenses,” per IRS guidelines. Funds withdrawn from an HSA for non-medical purposes are subject to tax and a penalty. At retirement, your employees may continue to draw down their HSA for medical purposes or withdraw any unused funds from their HSA for other purposes, paying normal income taxes.

For more information and answers to all of your questions about HSAs, see detailed information from the HSA Bank.

In the HSA model, consumers spend their own money up to the level of their high-deductible health insurance policy. Therefore, employees who exercise, refrain from smoking, maintain proper weight, and make appropriate healthcare decisions are financially rewarded.

Learn more about nontraditional health-benefit solutions.

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