How the Health Savings Account (HSA) Works

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: For someone participating in an HSA for full year...   State Contributes Employee can add: Total Contributions (from state and you) Individual Coverage (employee only) up to $500/year up to $2,500/year tax-free ...up to $3,000/year Family Coverage (employee + dependents) up to $1,000/year up to $4,950/year tax-free ...up to $5,950/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

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.

Contribute More - If You're 55 or Older

Federal rules allow "catch-up" contributions to a Health Savings Account - up to an extra $1,000 if you are 55+ or you will turn 55 any time during 2009.

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

If you enroll in an HIHP medical plan and activate (open) an HSA bank account:

• The state will make its tax-free contribution during the year on a monthly basis; you can do the same but you aren’t required to contribute. You decide what to contribute during Open Enrollment and can change the amount during the year.
• You will receive an HSA debit card and convenience checks you can use to 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 because unused HSA account balances "carry forward".
• Even if you change medical options in the future, you can still use the money in your HSA. You won’t be able to make additional contributions, but you can use the account to cover eligible expenses.
• 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.
• As long as you use the money in your account for healthcare expenses the IRS considers tax-deductible, the money is tax-free. See IRS Publication 502 for more information on eligible healthcare expenses.