Beyond Health Insurance: Health Savings Accounts

By Robert F. Bornstein, PhD and Mary A. Languirand, PhD

Health Savings Accounts (HSAs) are tax advantaged medical savings accounts owned by the individual (so they are portable in the event you change jobs). HSAs are designed to be used in conjunction with a High Deductible Health Insurance Plan (more on that below); the money contributed to the account is not subject to federal tax (that is, it represents pre-tax dollars). HSA funds can be used to pay all eligible medical related expenses that are not covered by your health insurance plan. The IRS defines qualified expenses as: "the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes."

HSA contribution limits in 2012 were $3,100 for individuals and $6,250 for families; if the owner of a family plan is age 55 or older a "catch up" provision allows an additional $1,000 for a total contribution of $7,250. These change each year, so consult the IRS website ( for up-to-date details on qualifying deductibles and contribution limits. Any money in your HSA account that is not used during a calendar year is rolled over to the following year. This is one of the primary benefits of an HSA when compared to an employer-based Flexible Spending Account (FSA).

How best to proceed if you're interested in starting an HSA? The health insurance provider where you purchase your High Deductible Health Plan will provide you with a list of local institutions, or you can choose any institution that sponsors HSA plans. The fees do vary between institutions but are generally fairly modest (a few dollars per month); some plans waive these fees once your account balance reaches a specified limit (usually several thousand dollars). It is not necessary for HSA participants to obtain approval in advance of withdrawing funds, and most HSA administrators make both checks and a debit card available for easy access to your money. Although any funds withdrawn for qualified medical expenses are tax free, you should keep documentation pertaining to all qualified medical purchases.


Robert Bornstein and Mary Languirand are the authors of When Someone You Love Needs Nursing Home, Assisted Living, or In Home Care, published by Newmarket Press. The second edition, revised and updated, was recently released. Here's the link: