Health Savings Accounts HSA was introduced in 2003 as a step toward the improvement and modernization of the Medicare Prescription and drug act; they soon became popular among the people due to their perks and benefits. Health savings accounts enable and provide the opportunity or help to people looking for options to save money to cover deductibles, medications, and other over-the-counter items.

HSA is the perfect option for people with health insurance deductibles in four figures. You can establish or open health savings account with your HDHP, you can pay your medical bill with funds in your HSA, and your insurance plan will pay the deductibles later and deposit the amount back into your account.

Health Savings Account:

HSAs or health saving accounts are savings accounts used to pay your medical or health-related expenses and cover items or expenses not included in your health insurance. They are also used for long terms savings; if the money is not used, it remains there longer. Health savings Accounts are tax-free, which is why they provide double long-term benefits.

These savings accounts are the best options for individuals with a high deductible insurance plan; HSA's covers your medical expenses as per your deductible limit until your insurance gets in covered; however, HSA's also provides a room or covers expenses that are not included in your insurance plan.

Eligibility for Opening a HAS (Health Saving Account):

Following are some conditions according to the Federal guidelines that make someone eligible to open HSA (health saving account). The conditions state that:

• Individuals can open an HSA if they have an HDHP qualified enough to meet the minimum deductibles and the maximum expenses an individual can pay in a year.
• An individual must not be covered or enrolled in more than one medical plan; the most common examples of that are covered as a spouse.
• A person must not be enrolled in Medicare.
• Similarly, a person must not have opted for TRICARE or TRICARE for Life.
• A person should not claim or be declared dependent on other tax returns.
• An individual taking benefits or enrolling in any benefits offered by veteran administration is ineligible to open a health savings account; however, veterans with HDHP plans and service-connected disabilities are eligible to receive and make HAS-related contributions regardless of their receiving from the VA benefits.
• Individuals with disqualifying medical savings or health repay accounts are not allowed to open an HSA.

Requirements for HDHP (High Deductible Health Plan):

Generally, a high deductible health plan implies low installments for high deductibles, but IRS makes certain requirements for HDHP if a health saving account is opened with HDHP. The IRS revises these requirements, criteria, or guidelines annually, keeping the inflation rate in view. Here are the latest criteria for opening an HDHP in 2022:

• The minimum Deductible is $1400 for individuals and $2800 for families.
• Similarly, an individual's yearly threshold or maximum expense limit is $7500 and $14100 for families.

The out-of-pocket maximum may differ from plan to plan or is assigned by the respective plan. Deductibles, co-insurance, and co-payments can also be included; however, insurance premiums are not included.

Understanding How HSA (Health Saving Account) Works:

All the contributions made are tax-deductible; either the employer deducts them if it is deducted from the payroll, or self-employed personal deductions are made at the end of the year when Tax is filed.

On the other hand, withdrawals are not liable to any taxes, provided they are qualified for medical expenses. They cover dental or vision care payments that are not usually covered in most health plans.

Generally, most HSAs provide a debit card to ease the account holder's use for medical prescriptions and other related expenses. If you receive a bill in your mail, it is payable with your debit by calling their billing center.

At the closure of each year, the money that remains in the account is yours and can be used for future medical expenses. The funds are carried over regularly at year's end, irrespective of any change in job or insurance plan, they remain under your ownership, and the money increases over time in HSA is Tax-free.

Setting Up a HAS (Health Savings Account):

To set up a health savings account (HAS), the first step you need to take is enrolling in HDHP; if you are applying through your employer's HR department, they are in a better position to advise you on establishing an HSA. Mostly HSA's are associated with employer-sponsored HDHP.

You can set it up independently if your HSA is not associated with HDHP. Different service providers are providing this service; Banks, Brokerages, and credit unions offer HSA's. Each entity has its terms and conditions for HSAs; health savings account open through a brokerage allows you to invest contributions in bonds, stocks, and funds, whereas a bank offers optimal interest rates if HSA is open.

After selecting the service provider, the next steps are easy; you only need to fill out the form and give your HDHP information; once approved, you can use your HSA for qualified expenses.

Final Thoughts:

A health savings account (HSA) is beneficial in every way; you can use it at the time of need without waiting for your insurance plan formalities, you can make expenses that qualify its terms, and all the qualified expenses will be deposited back to your health savings account (HAS) once your insurance plan kicks in. You can also pay for medical expenses not included in your insurance plan. The money that grows in your health savings account is Tax-free.