A Few HSA Basics
A health savings account (HSA) is a tax-exempt trust or custodial account to be used for paying qualified medical expenses. To open an HSA*, you must enroll in a qualified high-deductible health plan.
When you set up your HSA, the financial institution administering the account will provide you with a checkbook and/or debit card to use when paying for services and items with funds from your account. You do not need to contact BCBSAZ or the HSA administrator before making withdrawals from your HSA. Please consult with your tax or legal advisor to discuss the details regarding HSAs and whether an HSA is the right choice for you.
For eligible individuals, HSAs may provide tax advantages, and there are no "use-it-or-lose-it" restrictions. Generally, an "eligible individual" is any individual who is covered under a qualified high-deductible health plan, is not entitled to benefits under Medicare and is not claimed as a dependent on another person's tax return. Having other coverage in addition to a qualified high-deductible health plan may make you ineligible to contribute to an HSA.
Contributions* to your HSA may be made by the individual/employee, by an employer or by joint employee/employer funding. You must be covered by a qualified high-deductible health plan to put funds into your HSA. Contributions up to the annual maximum can be made as late as April 15 of the following year. If you are over 55, you can make additional "catch-up" contributions, as permitted by federal law. There are also special rules for spouses.
Withdrawals are generally tax-free if used for qualified medical expenses†. Or, you can pay for these expenses out of pocket and allow your HSA funds to accumulate. If you withdraw funds from your HSA for reasons other than those approved by the IRS, you may be subject to tax penalties.
If you do not use your HSA funds, the balance carries over at the end of the year for future use.