A health savings account is an alternative to traditional health insurance. Paired with a qualified high-deductible health plan, the HSA offers a different way for you to pay for your health care expenses. A health savings account allows you to pay for current health care expenses and save for future qualified health care expenses on a tax-free basis.
Health savings accounts were created to help give control back to consumers and lower health care costs. You own and control the money in your health savings account. Decisions on how to spend the money are made by you. You will also decide what types of investments to make with the money in the account in order to make it grow.
You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of a health savings account. An HDHP generally costs less than traditional health care insurance, so the money you save on insurance can therefore be put into the health savings account.
The following are some general features of health savings account:
- The contributions you make to your health savings account are tax deductible, which reduces your taxable income.
- Interest earned on your health savings account money is not subject to income taxes — in other words, you don’t have to pay income taxes on the earnings generated by the investments in your health savings account.
- You may make tax-free withdrawals to pay for qualified health care expenses.
- You own all of the money in your health savings account and it is yours to keep — even if you change medical plans.
Consider establishing a health savings account to maximize the benefits of your high deductible health plan. While you may open a health savings account with any institution of your choice, you can establish your account at BNY Mellon with our assistance.
Get the process started: