HSA Insights provides examples of HSAs in action.

“I like having control over my healthcare today while building resources for tomorrow.”

Ruth E., Tulsa, OK

SEE HOW HSAs WORK: USING YOUR HSA

Using your HSA is a lot easier than you might expect, which is one reason why they are popular with so many consumers. Here are the basics on how HSAs work to benefit you.

Using your HSA for Covered Qualified Expenses
You can choose to use your HSA funds to pay for qualified medical expenses (for example, office visits, lab work and prescription drugs) before you have met your annual deductible. These covered expenses will still count toward your annual deductible.

Using Your HSA for Uncovered Qualified Expenses
You may also choose to use your HSA funds for qualified services not covered by the health plan, such as dental care, weight loss programs and eyeglasses. These expenses, however, do not count toward your annual deductible.

Internal Revenue Code section 213 allows a tax deduction for expenses paid by a taxpayer for medical care, including over the counter (OTC) items. Qualified OTC medical expenses may be paid for or reimbursed from a Flexible Spending Arrangement (FSA) or health reimbursement arrangement (HRA) such as an HSA. In July 2009 the IRS provided additional information on what qualifies as medical care to include: care for the prevention of disease “only if there is a present existence or an imminent probability of developing a disease, physical or mental defect, or illness.” To learn more about the deductibility of OTC items visit: http://www.irs.gov/publications/p969/ix01.html.

Your Annual Deductible
If you prefer, you can save any or all of your HSA funds and pay for your medical expenses out of pocket until you meet your annual deductible. Once you've met this, additional health care expenses are covered by your medical plan, but you can still use your HSA funds to pay for fixed expenses such as co-payments.

Carrying an Account Balance
If you don't use all of your HSA dollars, the remaining amount will carry over into the next year. To make this a bit easier to understand, take a look at a few case studies of an HSA in action.