Frequently Asked Questions - Health Savings Accounts

Health Savings Accounts (HSAs) -- made available to consumers with the passage of the Medicare Modernization Act of 2003 – allow employers, employees and anyone else to contribute money to an account (the HSA), which an eligible individual uses to pay for qualified medical expenses until the deductible is reached.

  1. How do the tax savings work?
  2. How do I use the funds in my HSA?
  3. Can I roll over funds from other accounts into my HSA?
  4. What are qualified medical expenses?
  5. How do I explain a Business HSA to my employees?
  6. What is a Health Savings Account (HSA)?
  7. How does a Business HSA work?
  8. What is a Business HSA?
  9. Why should I consider getting an HSA?
  10. What is an HSA?
How do the tax savings work?

HSAs make it easy to save on your taxes:

  • At the end of each year, you will be sent a statement showing the amount you contributed to your HSA that year. You can deduct this amount provided it is less than or equal to the maximum allowable contribution.
  • Much like an IRA, HSA deductions are "above-the-line" and thus can be taken even if you do not itemize.
  • If you are self-employed, in addition to deducting your HSA contributions, you may be able to deduct 100% of your health insurance premiums, provided that:
    • You are not eligible to participate in a subsidized health plan offered by an employer or your spouse's employer.
    • The deduction does NOT exceed the amount of net income from your business.

Note: Check with your accountant or tax advisor for the specific federal and state tax benefits that apply to you.

How do I use the funds in my HSA?

Using funds in your Health Savings Account is easy:

  • Typically an HSA will provide you with a checkbook or debit card. When you pay for a qualified medical expenses, use the debit card or check to make the payment.

  • You do not need to get approval from the HSA administrator when you use funds in your account.

  • You do not need to submit receipts to the HSA administrator, although you should save them just as you keep receipts for other items that are deducted from your taxes.

NOTE: You must establish the HSA before you incur medical expenses otherwise the expenses will not qualify.

Can I roll over funds from other accounts into my HSA?

You can make a one-time distribution from an IRA to fund your HSA, provided it doesn't exceed HSA contribution limits. Employees have the opportunity for a one-time, tax-free transfer of funds from their flexible spending account (FSA) or health reimbursement arrangement (HSA) to their HSA.

What are qualified medical expenses?
HSAs can be used to pay for many types of medical expenses, even some that are often excluded on health insurance plans. These include:
  • Health insurance plan deductibles, copayments, and coinsurance
  • Prescription and over-the-counter drugs
  • Dental services, including braces, bridges, and crowns
  • Vision care, including glasses and lasik eye surgery
  • Psychiatric and certain psychological treatments
  • Long-term care services
  • Medically-related transportation and lodging

Typically HSAs cannot be used to pay health insurance premiums, although there are exceptions for:
  • Health insurance premiums if you are receiving federal or state unemployment benefits
  • Premiums for COBRA qualified health insurance
  • Certain qualified long-term care insurance premiums
  • Premiums for a health plan (other than a Medicare supplemental policy) for an individual age 65 or older

Note: You must establish an HSA before incurring any expenses or the expenses will not qualify.
How do I explain a Business HSA to my employees?
Your employees may not understand the benefits of BusinessHSA or the differences between BusinessHSA and traditional group health insurance. Here are a few key point to communicate.
  • The Business HSA allows employees the freedom to apply for the health insurance plan that best suits their needs and budget.

  • Through employer contributions to an employee's Health Savings Account, a Business HSA empowers employees to manage their own healthcare dollars.

  • While an HSA-compatible health insurance plan will require the employee to fulfill an annual deductible before coverage kicks in, expenses paid toward the deductible may be paid out of the employee's Health Savings Account, and leftover funds may be saved and grow from year to year. In case of a serious injury or accident, the HSA-compatible health plan will be there to cover medical bills beyond the deductible.

  • By participating in a BusinessHSA program, employees can find affordable HSA-compatible health insurance plans and have the option to save money for the future through a tax-advantaged savings account.
What is a Health Savings Account (HSA)?
Health Savings Accounts (HSAs) -- made available to consumers with the passage of the Medicare Modernization Act of 2003 – allow employers, employees and anyone else to contribute money to an account (the HSA), which an eligible individual uses to pay for qualified medical expenses until the deductible is reached.
 
Once the deductible is met, the individual’s health expenses are paid according to his or her health plan. The tax-advantaged accounts also permit unused funds to be “carried over” from year to year even if the employee changes employers. Any interest gained from the HSA belongs to the individual. Anyone who uses an HSA must also maintain health care benefits through a compatible high-deductible health plan (HDHP).  
 
Anthem Blue Cross and Blue Shield (Anthem) has aligned with JPMorgan Chase Bank (Chase), a global leader in the development of electronic payments solutions, to make it easy and convenient for members to establish and use a Health Savings Account (HSA).  
 
Anthem’s product, Anthem ByDesign HSA, offers an Anthem HDHP coupled with a Chase account that allows consumers to use checks and debit cards to pay for qualified medical expenses out of the HSA. 
How does a Business HSA work?
Business HSAs allow employers to help employees with healthcare expenses without sponsoring a group health insurance plan. To participate in the Business HSA, employees must apply and be approved for coverage under an HSA-compatible health insurance plan, and must open a Health Savings Account. Funds contributed to the employee's Health Savings Account may be used by the employee to pay for qualified healthcare expenses on a tax-free basis, or invested and saved for the future.
 
The eHealthInsurance Business HSA provides employers with an online enrollment center for their employees to shop for HSA-compatible insurance plans, establish their own Health Savings Accounts, and manage their own contributions and healthcare expenses.
 
In addition, the Anthem Blue Cross Business HSA gives employers a Business HSA Management Portal to add and remove future employees, adjust employer contribution levels, and even use automatic payroll integration with major vendors to simplify employer contributions.
 
By creating a Business HSA with Anthem Blue Cross, employers encourage their employees to purchase health insurance protection on their own while helping them with the high costs associated with healthcare today.
What is a Business HSA?
A Business HSA is a way for employers to assist employees with healthcare costs at a level they can afford. Employees purchase their own health insurance plans and open Health Savings Accounts. Employers contribute pre-tax dollars which may be used to pay for qualified medical expenses or saved for the future.
 
For Employers
To create a Business HSA program, employers must open a Business HSA account with eHealthInsurance and set their desired contribution levels for employees. Through our online portal, employers can easily add or remove future employees, adjust contribution levels, and make automatic contributions to their employees' Health Savings Accounts.
 
For Employees
To participate in a Business HSA program, employees must apply and be approved for coverage under an HSA-compatible health insurance plan. They must also open a Health Savings Account. The eHealthInsurance Business HSA program provides employees with an online resource to shop for HSA-compatible insurance plans, establish their own Health Savings Accounts, and track contributions and expenses.
 
Business HSA
Why should I consider getting an HSA?
You may save money in the short and long term by:
  • Deducting 100% of your HSA contributions from your taxable income

  • Having the money in your HSA accrue interest and/or gains on a tax-free basis

  • Paying no penalties or taxes when you use your HSA to pay for qualified medical expenses

  • Having a high-deductible HSA-compatible health insurance plan, which typically has a lower premium than a plan with a lower deductible

Note: Some HSAs charge a small monthly maintenance fee.
What is an HSA?
"HSA" stands for Health Savings Account. HSAs allow consumers to pay for qualified medical expenses with pre-tax dollars—meaning income-tax free—and save for retirement on a tax-deferred basis.
 
An HSA is tax-favored savings account that is used in conjunction with a high-deductible HSA-compatible health insurance plan to make healthcare more affordable and to save for retirement.
 
Health Savings Accounts
 
HSAs are similar to individual retirement accounts (IRAs), but even better:
  • Pre-tax money is deposited each year into an HSA and can be easily withdrawn at any time with no penalty or taxes to pay for qualified medical expenses. Withdrawals can also be made for non-medical purposes, but will be taxed as normal income and are subject to a 10 percent penalty if done prior to age 65.

  • Any HSA funds not used each year remain in the account, and earn interest tax-free to supplement medical expenses at any time in the future.

  • Like an IRA, the account belongs to you, not your employer. But unlike an IRA, your employer CAN contribute to your HSA.