What is a Health Savings Account (HSA)?

HSAs are a great way to pay for medical care expenses on a pre-tax basis. HSAs are individually owned accounts that allow you to set aside pre-tax dollars to fund the account. Interest or dividends accumulate tax-free; and payment of qualified medical expenses has no additional tax consequences.

HSAs work hand-in-hand with high deductible health plans (HDHP). Individuals who make contributions to an HSA must be covered by an HDHP. The HDHP must satisfy minimum deductible amounts with certain out-of-pocket maximums. HSA account holders may not be covered by any other insurance plan that is not an HDHP or that covers benefits provided by the HDHP or below the deductible of the HDHP. There are exceptions for "permitted insurance" or "permitted coverage" products.