After your HSA-qualified policy is in place, then establish the actual savings account at any qualified financial institution. This is similar to opening an IRA. You can maintain the account with a bank or investment firm, and yes, you can invest in stocks, bonds, mutual funds, etc., should you opt to do so. Relatively few financial institutions offer HSA accounts, for a variety of reasons. Our agency will refer you to several large, reputable financial institutions once your policy is in place.

Begin using the savings account. There is no minimum contribution required; however, just like an IRA, there is an annual maximum.Be sure not to contribute more than the maximum amount allowable each year; otherwise, a tax penalty will apply. When you incur medical expenses, simply use a Visa debit card or write a check to tap into the account. Withdrawals for qualified expenses are tax-free. Keep reading below for more benefits of an HSA plan.

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• Instant tax-savings--regardless of whether you itemize. When you file your taxes each year, all of the money you have deposited into your own HSA will be tax-deductible on line 25, front page, of your 1040 form (assuming you have qualifying income at least equal to your contribution amount). This will cut your tax bill by an average of $1,600 for a family (and about $700 for a single). Because of the tax savings, it is absolutely correct to say that with an HSA, you are paying routine medical bills with money you otherwise would have paid in taxes! How cool is that? (see examples below—you also save money on the actual bill in most cases)


• Double-discounts. When you visit a physician, you pay with tax-free money from your savings account--money you otherwise would have paid in taxes, for the most part.  The account is easily accessible by debit card or check.  If your provider is a member of the PPO discount network you have joined (through your HSA insurance policy), your bill will actually be reduced before you have to pay it.  (example: $120 Dr. visit reduced to $85.  You pay the discounted $85 with tax-free, i.e. discounted dollars from your HSA.)


• Rx savings. When you need to purchase prescriptions, simply visit a participating PPO discount pharmacy (most all major chains participate) and pay your discounted amount on the spot, either by debit card or check directly from your HSA account (again, with tax-free money). For greater savings, use the bulk priced Rx mail service.

• Tax-free money for dental, eyewear, etc. Most medical expenses not covered by the underlying health insurance policy may still be considered allowable expenses under the HSA.  For example, dental work, including braces, vision care, including glasses, eye surgery, alternative therapies such as acupuncture, etc. can all be paid for with tax-free money from the HSA.  Click here for the IRS approved list of qualified expenses.


• The Super-IRA effect. What you don't use from the HSA for medical bills each yours is yours to keep. The balance continues to grow and grow on a tax-sheltered, compound basis. Once you reach age 65, the account can basically be used just like a traditional IRA. Tip: Keep funding the HSA every year to the maximum amount allowable by year (this amount increases each year, by law). Use "after-tax" dollars to pay routine medical bills. This reduces your taxes each year and allows you to grow your account substantially larger, giving you a larger cushion against unexpected “catastrophic” type claims in the future, and a larger "pot of gold" for retirement.  (Note: If you do opt to dip into your HSA to pay routine medical bills with tax-free dollars, realize that dipping into your HSA savings account is not the same as dipping into your pockets—your HSA is the functional equivalent of “insurance” coverage for the small bills—what you don’t have to use is yours to keep. This is in stark contrast to paying an insurance company a few thousand dollars a year to do virtually the same thing--insure the “small” bills)

For more info, see Benefits of an HSA