With health care costs steadily rising, many Americans seek alternative ways to pay for their medical care. In 2003, the federal government passed a new law allowing people whose insurance saddled them with high deductibles to set aside tax-deferred funds for medical expenses in Health Savings Accounts. HSAs may make quality health care services accessible to people who cannot afford insurance coverage with high premiums and lower deductibles. The HSA program allows participants to withdraw funds to pay for qualified medical expenses.
Definition
An HSA is a type of supplemental savings account for people whose health insurance has a high yearly deductible. Similar to an IRA or other type of retirement investment, funds you invest in an HSA accrue interest and sit in the account unused until you require them. The difference is that until you reach retirement age, you can only withdraw funds from an HSA to pay for qualified medical expenses. In this way, HSAs are meant to offset the high cost of medical coverage for Americans with high insurance premiums and low health care coverage levels.
Eligible Coverage for Services
HSAs cover many different kinds of medical services and products. You can use your HSA funds to pay for all expenses related to inpatient and outpatient hospitalizations, medically-necessary hospice and rehabilitative care, office visits to medical specialists and visits to your primary care provider. An HSA also covers yearly checkups, many kinds of health screenings and other preventative medical expenses, such as vaccinations. Dental, vision and chiropractic services, as well as some forms of alternative medicine expenses such as acupuncture, are also eligible for coverage. If you have a disability that requires assistive equipment, such as a wheelchair, orthopedic shoes, medically-prescribed prosthetics, physical braces or hearing aids, you can use your HSA funds to pay for those devices as well. Prenatal, perinatal, neonatal and postnatal services are eligible for coverage for both the pregnant woman and her newborn.
Eligible Coverage for Medication
Your HSA covers all medications prescribed by a licensed medical professional. This includes preventative drug therapies, prescription drugs and vitamins, as long as you purchase them with a doctor's prescription. In addition to all prescription medication, an HSA's funds cover many over-the-counter medications, such as antacids, cold and flu medications, topical allergy treatments and over-the-counter pain relievers.
Non-eligible Services and Medications
HSA funds do not cover all expenses related to the insured person's health and well-being. You cannot use HSA funds to pay for any therapy, treatment or health programs you receive outside of a medically-approved facility by non-medical professionals. For example, HSA funds will not cover private school tuition for a special needs child nor will it cover the transportation expenses associated with attending that school. Membership fees for a fitness club or gym are ineligible for coverage as is the purchase of a swimming pool or personal exercise equipment. You may not use HSA funds to purchase any medication for which you do not have a medical prescription. This includes non-prescribed dietary supplements, personal cosmetic products and weight loss supplements. HSAs do not cover any type of elective cosmetic surgery, though it may cover reconstructive cosmetic surgery. All services and medications for which you intend to use your HSA funds must be legal to purchase, own and use.
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