Top Health Savings Account (HSA) Frequently Asked Questions:

1. How do I start a HSA? First, you have to have a qualifying health insurance plan. A qualifying health insurance plan is one that carries a high deductible, known as a High Deductible Health Plan (HDHP). Each year what is considered a high-deductible health insurance plan changes, but generally it would be a deductible that is not considered in the normal range for a health insurance plan. If you think you have a high-deductible health insurance plan, then you can contact your employer, health insurance company, or a number of private insured banks and credit unions locally or online to find out about setting up a HSA. Sometimes employers help contribute to HSAs, so make sure to see if yours does. (614) 545-4500.

2. If I switch jobs, do I lose my money? No. The health savings account is yours. Whatever money you contribute to your HSA you keep, just as you would in a savings account. Even if you don't use all your HSA money in one given year, the money will just roll-over to the next year for use.

3. Do I pay taxes on the money before it is put into my health savings account? No, the money goes into your HSA tax-free if your employer will set up paycheck deductions for you. If not, then when you prepare your federal income taxes you will be able to take a deduction for the money you contributed to your HSA that year. When you withdraw your health savings account money to pay for any qualifying expenses, it is withdrawn tax-free, so you win on both ends.

4. Can I have some examples of HSA qualifying expenses? Here are some examples of HSA qualifying expenses: prescription medicines and eye glasses, office visit co-pays, chiropractors, dentists, orthodontists, over-the-counter meds such as aspirin and antacids, birth-control (over-the-counter or prescription), and laser eye surgery, to name a few. Consult IRS Publication 502 – Qualified Medical and Dental Expenses, and your tax advisor for more complete information.

5. What happens if I lose my health insurance? Once you have money in your HSA, you can continue to use it even if you do not have a high-deductible health insurance plan anymore, but you cannot keep contributing money to your health savings account without the qualifying health insurance plan in place.

6. Can I use my HSA money to pay for my health insurance premiums? You can use your HSA money to pay for your health insurance premiums while you are collecting federal or state unemployment benefits. You can also use your HSA money to pay for COBRA premiums.

7. What if I need medical care in another country... can I use my HSA money there? Yes, your HSA money can be used for the same medical expenses anywhere and in another country.

8. How much can I contribute to my HSA account? That changes yearly but as of 2010 a single person could contribute any amount up to $3050 (plus $1000 catch-up) per year and a family could contribute up to $6150 (plus $1000 catch-up) per year. “Catch-up” contributions are each eligible family member 55 years of age and older.  A 2006 change in the HSA law allows individuals whose HDHP coverage begins part of the way into the year to make the full annual contribution amount for their first year of HSA eligibility.

9. Can my HSA money be invested? Yes. Your health savings account money can be invested similar to a 401(k) with the same risk of loss as an unsecured investment.  It is not required to be invested; it is permissible to keep your money in the insured account in which it is initially placed.  See a financial advisor for guidance in that area, and consult your tax advisor about liability on capital gains.

10. When I die, do I lose my HSA money? No. You can name a beneficiary to receive your health savings account money, and the account becomes theirs to use for qualified medical expenses.

11. What makes a plan qualified so I can open a HSA? 2010: Individual minimum deductible: $1200, family: $2400.  The plan must not contain first dollar benefits for services other than wellness screenings.

12. Is my contribution limit tied to my deductible? It used to be, but HSA contributions are no longer limited by the amount of your HDHP deductible. This means that even if you are covered by an HDHP, you may still contribute up to the full amount to your HSA (i.e., $3,050 for individuals with self-only coverage or $6,150 for individuals with family coverage in 2010). 

Partial List of HSA Qualified Expenses