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Health Care FAQs
HSA Expense FAQs
What are qualified expenses that may be paid from an HSA?
Account distributions are tax free for qualified medical expenses as defined by §213(d) of the IRC (further explanation may be found in IRS Publication 502, "Medical and Dental Expenses"). Tax-free distributions to pay premiums for long-term care insurance, COBRA continuation, and health insurance while unemployed are allowed. Qualified expenses also include prescription drugs, qualified long-term care services, Medicare expenses (but not Medigap), and retiree health expenses for individuals age 65 and older. Tax-free distributions may be made for medical expenses for persons covered by a high-deductible health plan, but they may also make tax-free distributions for their spouse or any dependent even if such individuals are not covered by the high-deductible health plan. If the amount distributed is used for something other than qualified medical expenses, the amount distributed will be taxed and, for individuals who are not disabled or over age 65, subject to a 10% tax penalty.
Can my HSA be used to pay premiums?
Normally, “Qualified medical expenses” do not include other health insurance premiums (including premiums for dental or vision care). However, certain exceptions do exist, including paying premiums while collecting Federal or State unemployment benefits, or paying COBRA continuation coverage through a former employer.
Are preventive care benefits permitted?
Generally, a high-deductible health plan cannot provide benefits before the deductible is satisfied, however, there is an exception for preventive care benefits. The IRS issued a "safe-harbor" list of benefits that can be provided by a high-deductible health plan, generally clarifying that traditional preventive care benefits, such as annual physicals, immunizations and screening services, are preventive care under HSAs, as well as routine prenatal and well-child care, tobacco cessation programs and obesity weight-loss programs.
What happens if my medical expenses exceed the amount of my deductible?
The coverage supplied by the High Deductible Health Plan (HDHP) will take over and cover the balance of the qualified expense.
What if my medical expenses do not reach my deductible? What happens to the money in my savings account that I don't need to spend on medical bills?
Individuals are able to roll-over unused funds in their HSA accounts from one year to the next. It is also possible to pay qualified expenses from a previous year, as long as they were incurred after the HSA was established.
What about taxes on the money in the account not used for medical expenses?
If under 65 any withdraw of funds from an HSA for a non-qualified expense is subjected to income tax and a 10% penalty tax on the withdrawn funds. If 65 or older, withdrawals out of an HSA for non-medical and non-qualified expenses are not subject to the 10% penalty, but still must pay income taxes on the amount withdrawn.
