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HSA (Health Savings Account)

Many of the private health insurance companies provided in the exchanges (Major Medical comparison system) offer health savings accounts.  These are financial (bank or credit union) savings accounts which you may sign up with paired with a High Deductible qualified plan.

health savings account (HSA) or A/K/A medical savings accounts (MSA’s) are tax-advantaged financial accounts available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).  The funds contributed to an account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate year to year if not spent. HSAs are owned by the individual, which differentiates them from company-owned Health Reimbursement Arrangements (HRA) that are an alternate tax-deductible source of funds paired with either HDHPs or standard health plans. HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty. However, beginning in early 2011 OTC (over the counter) medications cannot be paid with HSA dollars without a doctor’s prescription.   Withdrawals for non-medical expenses are treated very similarly to those in an individual retirement account (IRA) in that they may provide tax advantages if taken after retirement age, and they incur penalties if taken earlier. These accounts are a component of consumer-driven health care.

Contribution limits

According to IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans, you can generally make contributions to your HSA for a given tax year until the deadline for filing your income tax returns for that year, which is typically April 15. All contributions to an HSA from both the employer and the employee count toward the annual maximum.

Year Contribution Limit
Contribution Limit
Catch-Up Contribution
(55 or older) (Single and Family)
2009 $3,000 $5,950 $1,000
$3,050 $6,150 $1,000
$3,050 $6,150 $1,000
$3,100 $6,250 $1,000
2013 $3,250 $6,450 $1,000


HSA participants do not have to obtain advance approval from their HSA trustee or their medical insurer to withdraw funds, and the funds are not subject to income taxation if made for qualified medical expenses. These include costs for services and items covered by the health plan but subject to cost sharing such as a deductible and coinsurance, or co-payments, as well as many other expenses not covered under medical plans, such as dental, vision and chiropractic care; durable medical equipment such as eyeglasses and hearing aids; and transportation expenses related to medical care. Through December 31, 2010, non-prescription, over-the-counter medications were also eligible.   Beginning January 1, 2011 the Patient Protection and Affordable Care Act, also known as Health Care Reform, stipulates HSA funds can no longer be used to buy over-the-counter drugs without a doctor’s prescription.

There are several ways that funds in an HSA can be withdrawn. Some HSAs include a debit card, some supply checks for account holder use, and some allow for a reimbursement process similar to medical insurance. Most HSAs have more than one possible method for withdrawal, and the methods available vary from HSA to HSA. Checks and debits do not have to be made payable to the provider. Funds can be withdrawn for any reason, but withdrawals that are not for documented qualified medical expenses are subject to income taxes and a 20% penalty. The 20% tax penalty is waived for persons who have reached the age of 65 or have become disabled at the time of the withdrawal. Then, only income tax is paid on the withdrawal, and in effect the account has grown tax deferred (similar to an IRA). Medical expenses continue to be tax free. Prior to January 1, 2011, when new rules governing HSAs in the Patient Protection and Affordable Care Act went in to effect, the penalty for non-qualified withdrawals was 10%.

Account holders are required to retain documentation for their qualified medical expenses. Failure to retain and provide documentation could cause the IRS to rule withdrawals were not for qualified medical expenses and subject the taxpayer to additional penalties.

There is no deadline for self-reimbursements of qualified medical expenses. High-income individuals can take advantage of this by paying for medical costs out of pocket, retaining receipts and allowing their accounts to grow tax-free. Money can then be withdrawn years later for any reason, up to the value of the receipts. 

When a person dies, the funds in their HSA are transferred to the beneficiary named for the account. If the beneficiary is a surviving spouse, the transfer is tax-free.

HSA Accounts:

  • Are savings accounts which are set up for health care expenses to help with out of pocket expenses
  • Are paired with a High Deductible Health Plan
  • Provide tax advantages when used correctly
  • Can be set up with the insurance company or qualified bank separately

A HSA plan may be right for you if:

  • You are relatively healthy
  • You are willing to have a High Deductible Health Plan
  • You fund the HSA and pay for your everyday health care expenses out of the account (office visits, wellness care, prescriptions, and more)
  • You want the flexibility to go outside the provider network in needed
Many supplemental plans such as REALTORS® Core Health Insurance plan cannot be used in conjunction with an HSA plan.  You cannot set up an HSA (tax savings plan) and also a supplemental plan which would cover similar benefits for which the HSA is intended for.  Please contact us and we will be happy to help you with the best strategy.
NAR members have access to health, dental, and supplement insurance programs through the www.realtorsinsurancemarketplace.com; which is managed by SASid (Smart and Simple insurance development) who is a Proud Partner of the REALTORS Benefits Program.
SASid has helped thousands of NAR members nationwide find savings and gain access to the following insurance programs designed for members of the NAR:


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