HSA’s are tax-exempt custodial accounts established exclusively for the purpose of paying for reimbursing qualified medical expenses by you, your spouse or your dependents.
An HSA plan has 2 components:
- A qualified high deductible health insurance plan (HDHP)
- An HSA at a financial institution
- This account is designed to pay for routine medical expenses and/or provide savings for the future. Money put into the account can be used either during the year or accumulated.
Allowable medical expenses are defined by the IRS and are much broader than most providers (i.e. includes dental, vision). Individuals can deduct dollars contributed to the HSA account from their gross income, resulting in tax-free medical dollars. 1 HSA premiums are lower than other fully-insured plans with co-pays. The account is similar to an IRA account; however, it is for qualified medical expenses only.