Learn More About Health Savings Account Plans

What is an HSA Plan?
How it Works
The Tax Advantage
Triple Tax Break
Who is Eligible?
Eligible Expenses

What is an HSA Plan? 

An HSA-based high deductible health plan is an innovative new approach to health insurance. HSAs change the way millions meet their healthcare needs because they are designed to help individuals be more involved in their healthcare decisions, and save for qualified medical expenses.

There are two parts of an HSA Plan:

1. A federally qualified high deductible health plan
2. A tax-sheltered Health Savings Account

The high deductible health plan (HDHP) portion of this arrangement may have a higher upfront deductible than traditional insurance. But with an HSA-based high deductible health plan, you will also likely have lower monthly premiums, and certain preventive procedures are covered before the deductible is met.

If you choose an HSA-based high deductible plan, you are eligible to open a personal Health Savings Account (HSA) with a qualified vendor. Your HSA is a pre-tax fund that helps you save money for your and your family’s healthcare expenses. It’s like a 401k for your health (pre-tax contributions and tax-free distributions).

Mercy Health Plans is proud to partner with Bank of America® to offer support and administrative services associated with your HSA. Bank of America is one of the nation’s leading financial institutions and a leader in Health Savings Account plan administration. You may choose to utilize this vendor; however, you are not required to do so.

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How it Works  

Take the premiums you would have spent on a high cost traditional individual or group plan and split it into two parts. One part will go to pay for the lower cost higher deductible health insurance premium and the other part-- "the amount saved"—can go into a personal HSA that you set up and own. It’s your choice on where the saved part of the premium goes, but savings placed in the HSA can be used for the qualified medical expenses until the deductible is met.

Should the need arise for a larger medical expense the HDHP would kick in (after the deductible is met) and limit the out-of-pocket expenses to the selected deductible each year.

With an HSA-based high deductible health plan (HDHP), you may pay less in monthly premiums than you would for a traditional plan. The money you save with an HDHP can be put into your HSA to grow tax-free.

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The Tax Advantage  

An HSA provides you with a unique tax advantage. Dollars you deposit in your HSA are typically not subject to federal, state and social security taxes when deposited through payroll deduction or when you withdraw them. This makes your dollars stretch farther because you do not pay taxes on them. But remember, to receive ‘tax advantaged’ treatment, you must use the HSA funds for eligible expenses.

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Triple Tax Break 

An HSA‘s special features are often referred to as the ‘triple tax break’.

1. You don’t pay income tax on payroll deductions contributed to your HSA.
2. You don’t pay income tax on money withdrawn from your account either.
3. Your unused money can be invested with financial firms, and gains interest, still tax-free.

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Who is eligible?  

There are a few requirements you must meet in order to open an HSA. According to IRS guidelines, an eligible individual is anyone who:

is covered by an HSA-based HDHP

cannot be claimed as a dependent on someone else’s insurance

is under 65 and does not qualify for Medicare

is not covered by another non-HDHP

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Eligible Expenses 

The money you contribute to your HSA must be used on qualified medical expenses set by the Internal Revenue Service. We’ve listed some of the qualified expenses below as defined by the IRS. For a complete list, refer to IRS Publication 502 at www.irs.gov.

• Acupuncture
• Alcoholism treatment
• Bandages
• Chiropractic treatment
• Contact Lenses
• Crutches
• Dental Treatment
• Disabled dependent care expenses
• Hearing aids
• Hospital Services
• Laboratory fees
• Medications
• Psychologist fees
• Smoking cessation programs
• Surgery
• Xray

As you review this list, keep in mind that you may use the money in your HSA on qualified medical expenses for you, your spouse, and your dependents — they don’t have to be covered under your insurance to enjoy the benefits.

HSA plans are a great option to consider when choosing your healthcare coverage over the next year. For more information on Mercy Health Plans’ HSA options, contact your Human Resources department.

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