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Health Savings Accounts

The constant changes in health insurance plans and their costs can be overwhelming. As a way to help manage expenses, many employers and individuals opt for a High-Deductible Health Plan (HDHP) along with a Health Savings Account.

What is a High-Deductible Health Plan?

A High Deductible Health Plan (HDHP) is a health benefit plan that typically offers lower premiums in exchange for higher annual deductibles when compared to traditional health plans. Generally, this is a health plan that does not cover first dollar medical expenses however some high deductible plans may offer first-dollar coverage of preventative care and still remain qualified to use in tandem with a Health Savings Account.

To be an HSA compatible or “qualified” HDHP, the plan must meet the requirements of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 for minimum deductibles and out-of-pocket maximums.

Click here to view 2020 Deductible Limits, Out of Pocket Expense Limits and Contribution Limits.

What is a Health Savings Account (HSA)?

An HSA is a tax-favored savings account established exclusively for the purpose of paying or reimbursing qualified medical expenses of you, your spouse and your dependents. It is owned by you, is 100% vested, and lets you build up savings for future needs. A requirement for opening an HSA is that it be coupled with a qualified high deductible health plan (HDHP) that covers catastrophic medical expenses after the deductible.

The funds in an HSA can help pay your HDHP deductible and qualified medical expenses not covered by your insurance policy, including but not limited to:

COBRA Premiums Routine Healthcare Expenses Prescription Drugs
Dental/Orthodontic Care Emergency Visits Specialists

How does a HSA benefit you?

The Health Savings Account provides you with:

  • Tax Benefits: Contributions to an HSA are fully deductible, the earnings grow tax-deferred and distributions for qualified medical expenses are tax-free. Consult with your tax or legal professional for guidance.
  • Savings Flexibility: There are no limitations on frequency of deposit, only on the total deposit amount per year. The account can be used with any eligible HDHP and contributions may be made as late as April 15th of the following year.
  • No Use-It-Or-Lose-It Clause: The account belongs to the individual. You can use the funds as you need them. Funds remaining in the account at the end of each year roll over for future expenses and savings.
  • Easy Access: Withdrawals can be made to pay for qualified medical expenses via check or debit card provided with the account.
  • Additional Benefits: Money saved in an HSA can be used to pay COBRA or other medical insurance premiums during periods of unemployment or temporary layoff.
How can I open an HSA account?
  1. Check your eligibility.
    • Are you covered under a qualifying High-Deductible Health Plan? YES. If you have any questions about whether your current plan is considered an HDHP, check with your employer or insurance agent
    • Are you entitled to Medicare? NO.
    • Are you claimed as a dependent on another person’s tax return? NO.
  2. Confirm your eligibility.
    • Contact your current Human Resources Representative if you are insured through your employer, or
    • Contact your Health Insurance Agent.
  3. Stop in at a Capitol National Bank office and open your account. When you’re ready, we’re here to help!

To qualify for a Health Savings Account, you must be participating in a qualified High-Deductible Health Plan (HDHP). Other limitations may apply. Check with your insurance agent or tax advisor to confirm eligibility.

HSA Questions & Answers