Using Your HSA


Does an HSA pay for the same things that regular insurance pays for?

How do I know what is included as “qualified medical expenses”?

Who decides whether the money I’m spending from my HSA is for a “qualified medical expense”?

What happens if I don’t use the money in the HSA for medical expenses?

Are dental and vision care qualified medical expenses under a Health Savings Account?

Can I use the money in my HSA to pay for medical care for a family member?

Can I use my HSA to pay for my child’s expenses?

How can my child qualify as my tax dependent?

Can I use my HSA to pay for medical serviced provided in other countries?

Can I pay my health insurance premiums with an HSA?

Can I purchase long-term care insurance with money from my HSA?

I have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free?

What happens to the money in my HSA if I lose my HDHP coverage? 

Do unused funds in a Health Savings Account roll over year after year?

What happens to the money in a Health Savings Account after you turn age 65?

Can I use my HSA to pay for medical expenses incurred before I set up my account? 

Who will be the “bookkeeper” for my HSA?

How do I use my HSA to pay my physician when I’m at the physician’s office? 

Does an HSA pay for the same things that regular insurance pays for?  Top
HSA funds can pay for any “qualified medical expense”, even if the expense is not covered by your HDHP. For example, most health insurance does not cover the cost of prescription eyeglasses, but HSAs can. If the money from the HSA is used for qualified medical expenses, then the money spent is tax-free.

How do I know what is included as “qualified medical expenses”?  Top
Unfortunately, we cannot provide a definitive list of “qualified medical expenses”. A partial list is provided in IRS Pub 502 (available at www.irs.gov). There have been thousands of cases involving the many nuances of what constitutes “medical care” for purposes of section 213(d) of the Internal Revenue Code. A determination of whether an expense is for “medical care” is based on all the relevant facts and circumstances. To be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness. The determination often hangs on the word “primarily.” Contact FlexBank as you have questions about eligible expenses. CLICK HERE TO VIEW A LIST OF SAMPLE QUALIFYING AND NON-QUALIFYING EXPENSES

Who decides whether the money I’m spending from my HSA is for a “qualified medical expense?”  Top
You are responsible for that decision, and therefore should familiarize yourself with what qualified medical expenses are (as partially defined in IRS Publication 502) and also keep your receipts in case you need to defend your expenditures or decisions during an audit.

What happens if I don’t use the money in the HSA for medical expenses?  Top
If the money is used for other than qualified medical expenses, the expenditure will be taxed and, for individuals who are not disabled or over age 65, subject to an additional penalty.

Are dental and vision care qualified medical expenses under a Health Savings Account?  Top
Generally, yes. However, cosmetic procedures, like cosmetic dentistry, would not be considered qualified medical expenses.

Can I use the money in my HSA to pay for medical care for a family member?  Top
Yes, you may withdraw funds to pay for the qualified medical expenses of yourself, your spouse or a dependent. This is one of the great advantages of HSAs.

Can I use my HSA to pay for my child’s expenses? Top

Health care reform did not change the rules governing HSAs when it comes to paying for a child’s medical expenses. This means you can only use your HSA to pay for your child’s medical expenses if your child qualifies as your tax dependent (other than the income limitation).

How can my child qualify as my tax dependent? Top

There are two ways a child can be your tax dependent. The first way is if your child is considered a Qualifying Child and the second way is if your child is considered a Qualifying Relative. The following lists the requirements for each category.

     I.  Qualifying Child

            a) The child lives with you for more than half the year;

            b) The child is under age 19 or is a full time student under age 24

            c) The child does not provide more than half of his or her own support; and

            d) The child does not file a joint tax return with his or her spouse.

  II.  Qualifying Relative

           a) You must provide at least 50% of the child’s support

Can I use my HSA to pay for medical services provided in other countries?  Top
Yes.

Can I pay my health insurance premiums with an HSA?  Top
You can use your HSA to pay health insurance premiums if you are collecting Federal or State unemployment benefits, or you have COBRA continuation coverage through a former employer. HSA holders age 65 or over (whether or not they are entitled to Medicare) may use HSA funds for any deductible health insurance (e.g., retiree medical coverage) other than a Medicare supplemental policy. The insured must also be age 65 or over if different than the HSA owner.

Can I purchase long-term care insurance with money from my HSA?  Top
Yes, if have an HSA through a cafeteria plan and you have tax-qualified long-term care insurance. However, the amount considered a qualified medical expense depends on your age. Click here for annually indexed LTC premium limitations.

I have an HSA but no longer have HDHP coverage. Can I still use the money that is already in the HSA for medical expenses tax-free?   Top
Once funds are deposited into the HSA, the account can be used to pay for qualified medical expenses tax-free, even if you no longer have HDHP coverage. The funds in your account roll over automatically each year and remain indefinitely until used. There is no time limit on using the funds.

What happens to the money in my HSA if I lose my HDHP coverage?  Top
Funds deposited into your HSA remain in your account and automatically roll over from one year to the next. You may continue to use the HSA funds for qualified medical expenses. You are no longer eligible to contribute to an HSA for months that you are not an eligible individual because you are not covered by an HDHP. If you have coverage by an HDHP for less than a year, the annual maximum contribution is reduced; if you made a contribution to your HSA for the year based on a full year’s coverage by the HDHP, you will need to withdraw some of the contribution to avoid the tax on excess HSA contributions. If you regain HDHP coverage at a later date, you can begin making contributions to your HSA again.

Do unused funds in a Health Savings Account roll over year after year?  Top
Yes, the unused balance in a Health Savings Account automatically rolls over year after year. You won’t lose your money if you don’t spend it within the year.

What happens to the money in a Health Savings Account after you turn age 65?  Top
You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare (age 65 or older), you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy.
Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and an additional penalty on the amount withdrawn.

Can I use my HSA to pay for medical expenses incurred before I set up my account?  Top
No. You cannot reimburse qualified medical expenses incurred before your high deductible health plan is effective AND your health savings account is established (opened & funded). We recommend you establish your account as soon as possible. According to IRS ruling, state trust law determines when an HSA is established. Most state trust laws require that for a trust to exist, it must be funded to be established.

If the effective date of your HDHP is mid-month, you may use your HSA for eligible expenses with dates of service on or after the first of the following month.

Who will be the “bookkeeper” for my HSA?  Top
It is your responsibility to keep track of your expenditures and keep all of your receipts.

How do I use my HSA to pay my physician when I’m at the physician’s office?  Top
If you are still covered by your HDHP and have not met your policy deductible, you will be responsible for 100% of the amount agreed to be paid by your insurance policy to the physician. Your physician may ask you to pay for the services provided before you leave the office. If your HSA custodian has provided you with a checkbook or debit card, you can pay your physician directly from the account. If the custodian does not offer these features, you can pay the physician with your own money and reimburse yourself for the expense from the account after your visit.
If your physician does not ask for payment at the time of service, the physician should submit a claim to your insurance company, and the insurance company will apply any discounts based on their contract with the physician. You should then receive an “Explanation of Benefits” from your insurance plan stating how much the negotiated payment amount is, and that you are responsible for 100% of this negotiated amount. If you have not already made any payment to the physician for the services provided, the physician will then send you a bill for payment.