Health Savings Account (HSA)
A health savings account (HSA) is a special health care account that you can use to accumulate tax-free funds to pay for current medical expenses or save for the future.
How an HSA Works
An HSA works a lot like a savings account that you use to pay for qualified health care expenses. The result is that your HSA can pay a portion of your deductible, reducing your out-of-pocket costs. You can also use your HSA to pay for copayments and other qualified medical costs.
According to federal regulations, to open and use an HSA, you must subscribe to a plan with deductibles of at least $1,100 for an individual and $2,200 for a family in 2007. In general, the deductible must apply to all coverage, including pharmacy. Blue Cross and Blue Shield of Massachusetts plans give you access to preventive care outside the deductible—helping to keep your costs low.
Funding Your HSA
You and your employer can both fund an HSA up to your deductible or limits set by the Internal Revenue Service. For 2007, those limits are $2,850 for an individual and $5,650 for a family, regardless of your deductible. Individuals age 55 or older can make catch-up contributions of $800 in 2007 annually to their account too.
One key advantage of an HSA is that your contributions are pre-tax, which reduces your tax liability. For example, say you're in the 30 percent federal tax bracket and contribute $100 each month to your HSA. Your taxable income will decrease by $100, saving you $30 in tax.
Another great benefit is that you can choose to invest the money in your HSA. Some accounts include an option to invest in mutual funds and money market accounts. Depending on who administers your HSA, there may be minimum balance requirements to invest; check your plan materials for more information.
Calculate Your Contribution
Our easy-to-use online advisor tool helps you estimate your yearly out-of-pocket costs and track your health care expenditures.
Subimo Coverage AdvisorSM: Enter general information regarding your health plan and covered family members to anticipate your potential health care costs per year.
Building Health Care Savings
The money in an HSA is yours, and you control the account. If you leave your employer, your account goes with you—and any unused funds roll over from year to year. This means you can save funds for use in future years and even in retirement.
Using Your HSA
You own your HSA, which means you can use it for qualified medical expenses, including some expenses that are not covered by traditional health plans, such as laser eye surgery. You can even use it for non-qualified health care expenses, but you'll have to pay taxes and a 10-percent penalty.
