What is a Health Savings Account?
An HSA is a form of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. Similar to an IRA it can be invested to grow that amount pre-tax. The funds are then used to pay for deductibles, copayments, coinsurance, and some other expenses. Generally, the funds in your may not be used to pay premiums.
To qualify to set up and contribute to an HSA you must have a High Deductible Health Plan (HDHP). A HDHP is a health plan that only covers preventive services before the deductible. You can search for plans on the Health Care Marketplace to learn if they are eligible for an HSA.
For 2022, if you have an HDHP, you can contribute up to $3,650 for self-only coverage and up to $7,300 for family coverage into an HSA. HSA funds roll over year to year if you don't spend them. An HSA may earn interest or other earnings, which are not taxable.
Some health insurance companies offer HSAs for their HDHPs. Check with your company. You can also open an HSA through some banks and other financial institutions.
Will an HSA Pay for Long Term Care
While your HSA will not pay directly for long-term care itself, it can be used – tax-free – to pay for qualified long-term care insurance premiums. However, the IRS will only allow you to pay for long-term care insurance with your HSA in certain situations.
Insurance premiums are generally not treated as qualified medical expenses by the IRS, unless those premiums are for:
- Qualified long-term care insurance (most policies currently on the market are qualified)
- Health care continuation coverage
- Health care coverage while receiving unemployment compensation
- Medicare and other coverage for those who are 65 and older
HSA funds can also be used to pay for:
- COBRA coverage
- Health care coverage while unemployed
- Other health coverage once you or your loved one is age 65 or older
- Qualified long-term care services
Getting Assistance with HSAs
Reach out to your current insurance provider or seek. Healthcare.gov also has information on High Deductible Health Plans and Health Savings Accounts