What is Health Savings Account (HSA): How HSAs Work and How to Apply?
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Health Savings Account or HSA is basically a tax-benefitting account that is linked to a high deductible Health Insurance Plan (HDHP) which exempts the insured from paying certain taxes. It essentially works like your personal savings account that once opened and linked with your HDHP covers up the expenses incurred on copays which are out-of-pocket medical costs.
Importance Of A Health Savings Account (HSA)
At the onset, an HSA intends to provide tax advantages to the insured since the monetary contribution that is attributed to a Health Savings Account is exempted from tax thereby, lowering the taxable income of a person. Besides that, other benefits of an HSA are enlisted below:
- HSAs also cover the cost of many eligible services offered for mental health and dental care. Some over-the-counter drugs and products used during menstruation also are eligible under the T&C of Health Savings Accounts post Covid-19
- Health Savings Account cover up medical expenses for family members too if they are dependants having a claim in your health insurance plan
- The amount of money which is withdrawn from an HSA is tax deductible and saves you from paying tax provided, it is being used for medical expenses
- HSAs help the insured in diversifying their investment portfolio because the funds that are contributed to a Health Savings Account can be invested in stocks, mutual funds, and Exchange-Traded funds (ETFs)
- If you are holding a Health Savings Account, it saves you from paying tax if you wish to transfer the money to another security asset referred to as roll over. Also, there is no minimum distribution amount accorded to an HSA. Most employers provide an HSA to their employees
How does an HSA work?
Any HSA account holder can confer money to the account before they file for tax and seek exemption on the HSA fund as no tax is levied on this income which is intended for the purpose of covering medical bills and consequently, the amount in the individual’s HSA is deducted from their taxable income. Apart from this, in the USA if an individual loses his/her employment, and is enjoying benefits under COBRA health insurance plan, they may use the amount accrued in HSA to pay their EMIs or premiums.
Although, HSA is a novel concept that is gradually gaining momentum in terms of ideation, conceptualisation, and application but, for any queries on its merits, uses and other functional modalities; please feel free to connect with us at InsuranceDekho:
You can contact our expert team at the Toll - free number 7551196989 or email us at support@insurancedekho.com
How To Apply for a Health Savings Account?
One of the simplest ways to open a Health Savings Account is buying a health insurance plan that offers an HSA and availing it. A comprehensive health plan that qualifies for HSA is referred to as a High Deductible Health Insurance Plan (HDHP) though, it may not cover one’s medical expenses under spouse’s health plan, Medicaid, Medicare etc but will cover all other medical claims as described above.
Secondly, you have an option of asking your employer to provide you with an HSA.
Few banks in India such as IDFC FIRST Bank, Jeevan Suraksha bank, Canara bank have been providing the facility of Health Savings Account. You need to fill up the registration form provided by the bank along with a set of documents namely Adhaar card, Pan card, residence proof and passport-sized photographs.
How to use HSAs for Qualified Medical Expenses?
Some medical, dental, vision related conditions/treatments and services that qualify for an HSA are enumerated below:
Medical Expenses:
- Medical coinsurance which is basically the percentage of medical cost that is pending to be paid by the person after paying the deductibles; and copays
- Ambulance and Paramedical Services
- First aid squad
- Lab diagnostic tests
- Gynaecological treatment
- Blood Sugar/Glucose intolerance/ Blood tests
- Prescription drugs/medications
- Hearing aid devices
- Prosthetic mobility aid crutches
- Surgical treatments
- X ray services
- Vaccination
Dental Expenses:
- Eligible dental treatments and services that are covered by an HSA include tooth restorations (caps, veneers, fillings); scaling (cleaning); braces; X rays; dental root canal sealants etc and copays under the dental plan
Eye/Visual Conditions And Treatments:
- Vision plan’s copays, coinsurance, and deductibles
- Prescription contact lens and eye solution
- Vision examination, and diagnostic services (optometrist)
- Eye drops
Other bonus Expenses:
After the introduction of CARES Act due to COVID-19 in 2020, few additional medications like over-the-counter (OTC) pills and menstrual products now qualify in the HSA coverage. Medicines like Aspirin, anti-allergic medication; sanitary pads, tampons, menstrual underwear, and cups are all eligible under the same.
- Health-Related Trip: If one is travelling for his/her medical treatment to an offshore location, the healthcare company will cover the expenses under the HSA fund
- Post Birth Care: Post delivery of a newborn, HSA fund can offset cost borne on neonatal products like breast feeding pumps, milk bottles, nursing bras etc
- Family Planning Services And Treatments: HSA savings fund can be utilised to cover the expenses related to planning a family such as fertility treatment, pregnancy tests, contraceptive pills, and diagnostic services
- Addiction Treatment: An insured individual can reimburse the cost incurred on addiction management, treatments availed for substance abuse, and weight loss therapies from their HSA savings fund
Comparing HSA Vs Flexible Savings Account
Health Savings Account (HSA) |
Flexible Savings Account |
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HSAs offer higher contribution amount that a person can roll over/carry forward, tax-free provided they have linked the HSA with an HSA-qualifying health insurance plan |
FSAs offer limited contribution amount and do not provide much scope for roll over neither can they be carry forwarded to other savings fund |
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To open an HSA, you need an eligible HSA- qualifying insurance plan |
A health insurance plan is not mandatory to open an FSA |
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HSA fund is tax deductible |
FSA amount is not tax deductible |
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Even if the employer is providing you an HSA, it belongs to you |
FSA does not belong to the employee as the fund gets forfeited by the organisation once the person quits the job |
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In an HSA, one can contribute more amount for their family members |
FSA limits are under an employer’s control therefore, it offers little scope for family coverage |
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Total opted amount in the HSA fund is not available from day one of the plan |
Total FSA amount in entirety is available to you since the first day of the plan |
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HSA savings can be used post-retirement too for the eligible medical services and treatments |
Amount in one’s FSA do not accord coverage benefits for medical services post-retirement |
Integrating HSAs with Your Health Insurance Plan
HSAs once integrated with an HSA-qualifying health insurance plan accords an insured person the benefit of making tax free monetary contributions in the HSA fund that can be optimally used to cover qualified medical expenses. HSA savings are not only tax free but earn an interest amount and easily roll over to next fiscal year. The money accrued in one’s HSA can be utilised for investment purposes like stocks and mutual funds when linked to a high deductible health insurance plan (HDHP). One of the simplest ways to ensure an effective integration of a health insurance plan and HSA is to buy a health insurance plan for ‘limited purpose’ which essentially will provide reimbursement of medical expenses that do not get covered under HSA’s deductibles.
Customer Support for Health Savings Account
For all queries related to a Health Savings Account, our policy guides and customer care staff are available 24*7 to help you. So, please reach out to us by visiting our web portal: www.insurancedekho.com | Call on toll - free number- 7551196989 | Drop an email at support@insurancedekho.com
