Health Savings Account (HSA) | Meaning

What is HSA?

A Health Savings Account, known as HSA, is a type of savings account that is linked to a high-deductible health plan that qualifies for the HSA. Employees can profit from Health Savings Accounts since they are tax-deductible. Instead of being a direct deduction like FSA funds, the money employees put into HSA accounts decreases their taxable income. Workers can then use the funds for eligible medical costs without incurring any tax consequences.

The amount in an HSA is the employee’s money. Workers with these accounts can receive a credit card connected to their account, making it easier to pay for medical expenses. Workers can use this money for anything other than approved medical bills, but they must pay a tax penalty if they do. 

HSAs must always be associated with high-deductible health plans by law. In comparison to other health plans, these policies often feature cheaper premiums and greater maximum out-of-pocket expenditures. Employees might end up having to pay more for healthcare while saving money on premiums. To get the most out of an HSA plan, an employee must set aside enough money from each paycheck to cover current medical expenses as well as prepare for unforeseen expenses.