Health savings accounts, or HSAs, are a relatively new way to pay for health care. HSA insurance combines a high-deductible health plan, or HDHP, with an HSA to help you pay current and future medical expenses. A benefit to using HSA insurance is that the IRS allows tax-free withdrawals for qualified expenses. Qualified expenses include doctor visits, hospital expenses, lab, X-ray and diagnostic services. In addition, prescription medications, dental and vision care and hearing aids also qualify. HSA insurance can be an option if your employer doesn't provide health insurance or if you're self-employed.
Purchase a High Deductible Health Plan
Step 1
Research options available for HDHPs. HDHP insurance usually covers expenses directly related to hospital care, such as hospital stays, X-rays and surgical expenses. Plans that include office visits and prescription medications may cost more. Monthly premiums depend on coverage and the deductible you choose.
Step 2
Compare plans and get quotes. Contact an insurance agent or conduct research online. Many websites offer comparison-shopping services specific to the state in which you live and include information about insurance options, network discounts, deductibles and premiums. Examples of comparison-shopping sites include HealthSavingsAccounts, HSAConnect and HSAHealthPlans.
Step 3
Choose a plan and fill out the insurance application. If you're working with an insurance agent, he or she can help if you have questions. If you choose an online agency, look for a customer service number or "frequently asked questions" section if you need help.
Set Up a Health Savings Account
Step 1
Choose the bank or financial institution where you want to set up the HSA. Alternatively, check with the insurance company where you purchased the HDHP to see if it offers this service. Most banks, financial institutions and agencies charge a monthly service fee to administer your HSA, so compare fees before setting up the account.
Step 2
Fill out the enrollment form, either in person or online. You'll need information from your HDHP to set up the account, so wait until you receive HDHP documents before applying.
Step 3
Make an initial deposit to begin funding the account. Within two weeks, you'll receive a debit card tied to the HSA that you can use to pay medical expenses as they arise.
Tips and Warnings
- The HDHP you choose must have qualifying minimum and maximum annual deductibles and out-of-pocket expenses. IRS regulations for 2010 specify a minimum annual deductible of $1,200 for single coverage and $2,400 for family coverage. The maximum annual deductible and other out-of-pocket expenses cannot exceed $5,950 for single coverage and $11,900 for family coverage. Information you need when filling out the HDHP application includes contact information for your doctor, information on any medications you currently take, past hospitalizations, the date you want the plan to be effective and payment information.
- The IRS requires your financial institution to send out IRS Form 5498-SA if you contribute to the HSA and IRS Form 1099-SA if you make any withdrawals from the account. This allows you to get the tax advantages HSAs provide and to ensure withdrawals are for qualified medical expenses. If you use HSA funds for any other reason, you're subject to taxes and penalties. In addition, the IRS requires you to file Form 8889 with your tax return if the HSA had any activity in the previous year.
Things You'll Need
- Insurance application information
- Medical history
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