What is a health savings account?
A health savings account is a personal savings account that operates on a pre-tax basis to help people save for qualified medical expenses. It is available to individuals enrolled in a high-deductible health plan, or HDHP, to pay for expenses that go above and beyond the plan's coverage limits. By using untaxed dollars, individuals may save on health care costs. A health savings account, or HSA, can be used to pay for medical, dental and vision care as well as prescription drugs, copayments, coinsurance, and deductibles. Contributions can be made to an HSA by the individual, an employer, or anyone who wants to contribute on the individual's behalf. HSA funds can be used to pay for the medical expenses of family members.
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When do I need to be aware of health savings accounts?
If you want to find a way to save on health care expenses and prefer a lower-premium insurance plan with a high deductible, you may be interested in a health savings account. Because the money is deducted on a pre-tax basis, you may also be interested if you want to save on the amount you pay in income taxes
What is important to know about health savings accounts?
To be eligible for a health savings account, you must be enrolled in a high-deductible health plan. A plan must fulfill specific requirements to qualify as an HDHP. There are some other important items you should know about health savings accounts:
- Generally, an HDHP covers only preventive services before the insured meets the deductible; the plan pays for no other services until the deductible is met.
- The plan must meet a minimum deductible set by the IRS; for the 2021 plan year, it is $1,400 for individual plans and $2,800 for family plans.
- The IRS sets an out-of-pocket maximum for HDHPs; for the 2021 plan year, it is $7,000 for individual plans and $14,000 for family plans.
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