How the Health Savings Account (HSA) Works

	HSA Enrollment Required When you sign up for a Health Investor PPO or HMO, you still have to enroll in a Health Savings Account and complete any steps to activate your account before you can take advantage of the State's contribution. See How to Enroll for what you need to do.

An HSA is like a personal savings account for healthcare, except it's all tax-free. Here's how it works if you enroll in a Health Investor Medical Plan and participate in an HSA for the entire calendar year:

Pay for expenses while meeting deductible...

Pay coinsurance...

Pay for other healthcare like dental and vision not covered by FSA or other plans...

Save for future healthcare costs... next year or longer-term

Contribute More - If You're 55 or Older

Federal rules allow "catch-up" contributions to a Health Savings Account - up to an extra $900 if you are 55+ or you will turn 55 any time during 2008.

How much can I reduce my taxes using an HSA?

Money you set aside in the HSA is taken off the top of your pay before taxes. If you pay federal income tax and Social Security tax, this creates at least a 20% savings on most of the healthcare services you buy. The savings could be more - depending on your income tax rate. Even when you pay no income taxes, the Social Security tax savings is about 7.5% — or $7.50 for each $100 you spend.

More about Health Savings Accounts

Once you activate your Health Savings Account:

• The State will make its tax-free contribution during the year on a monthly basis, and you may add your own pre-tax contributions as long as you open a properly designated personal bank account. You decide how much you want to contribute during Open Enrollment; you may make changes during the year.
• When you receive your HSA debit card and convenience checks, you can draw on your account at any time for eligible expenses, up to the amount in your account at the time. You decide how and when to use available HSA funds.
• You don't have to worry about "use it or lose it" rules - in fact, the HSA operates with a "use it or keep it" philosophy. This makes it different than the Medical Reimbursement Account the State offers.

  	You may be required to provide proof of expenses submitted for HSA reimbursement if the IRS requests them. It's important to save copies of receipts for expenses paid through your HSA.

• HSA account balances "carry forward" - letting you save for future healthcare expenses, even retiree healthcare costs.
• If you stay in a Health Investor PPO or HMO beyond 2008, you can use HSA contributions you make in future years to cover 2008 expenses. For example, if you have $1,250 in your HSA and $1,500 in expenses for 2008, you could use money you contribute to your HSA in 2009 to reimburse yourself for the $250 that your 2008 account didn't cover.
• Even if you change medical options in the future, you can still use the money in your HSA. You may contribute to the HSA only in years you participate in a Health Investor plan, but you can use it to cover eligible healthcare expenses later.
• Your account balance is yours if you leave your State job, and you can continue to use it tax-free for healthcare expenses or roll it over to another HSA. If you leave it with the State's HSA custodian, fees may be subject to change.
• As long as you use the money in your account for healthcare expenses the IRS considers tax-deductible, the money is tax-free. Money you set aside in the HSA is taken off the top of your pay before taxes. If you pay federal income tax and Social Security tax, this creates at least a 20% savings on most of the healthcare services you buy. The savings could be more - depending on your income tax rate. Even when you pay no income taxes, the Social Security tax savings is about 7.5% — or $7.50 for each $100 you spend. See IRS Publication 502 for more information on eligible healthcare expenses.