How can I use my HSA?

Health savings accounts are a great way to save money. They also let you make more decisions about how you spend your money on health care expenses. Here's how you can use an HSA to pay for today’s health care expenses and save for tomorrow’s, tax-free.

1. Enroll in a high-deductible health plan. Blue Cross Blue Shield of Michigan has these health insurance plans that work with HSAs.

• Employer-sponsored: Blue Care Network HMO HSA℠, Simply Blue℠
  
• For individuals and families: Flexible Blue II 1500℠, Flexible Blue II 2500℠, Flexible Blue II 5000℠

2. Open an HSA. You can go to most banks, credit unions, insurance companies and other financial institutions to open a health savings account. Employer-sponsored health plans compatible with an HSA may partner with a bank you can use.

3. Contribute to your HSA. You, your employer and even friends and relatives and friends can put money in your HSA. That money is either not taxed or tax-deductible, so everyone saves.

• In 2012, the most money you could put into your HSA in one year is $3,050 for individuals and $6,150 for family coverage. These amounts are adjusted annually by the federal government.
• If you don’t use all the money in your account by the end of the calendar year, it rolls over to the next year.

4. Use the money in your HSA. You control how the money in your HSA is spent. You can:

• Pay your copayment, coinsurance and deductibles for services covered through your high-deductible health plan
  
• Pay for qualified medical expenses not covered by your high-deductible health plan
  
• Pay for qualified medical expenses for yourself, your spouse or your dependents.

If you use money in your HSA for something other than a qualified medical expense, you'll have to pay income taxes on that amount. And you'll have to pay a 10 percent tax penalty, unless you are disabled or over age 65.

5. Pay for your medical expenses from your HSA. In most cases, you’ll get a checkbook or debit card with your HSA that you can use to pay your doctor, pharmacist, or for other qualified medical expenses. If this feature is not offered, you can pay for your services upfront and reimburse yourself from the money in your HSA.

Generally you can’t use the money in your HSA to pay for medical insurance premiums. You can use it to pay for:

• Any health care plan while receiving federal or state unemployment benefits
• COBRA continuation coverage after leaving employment with a company that offers health insurance coverage
• Qualified long-term care insurance
• Premiums and out-of-pocket expenses, including deductibles, copayments, and coinsurance for any part of Medicare

You can use your account to pay for things other than medical expenses. You’ll have to pay income tax on any amount you withdraw to pay for non-medical expenses, but you won’t be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10 percent penalty on the amount withdrawn.

6. Invest your money. You can invest the money in your HRA the same as an IRA. You can invest it in stocks, bonds, mutual funds and certificates of deposit.

7. Enjoy your retirement. When you turn 65 and enroll in Medicare, you can’t contribute to your HSA anymore. You can keep using your account tax-free for out-of-pocket health care expenses. You can also:

• Pay your Medicare premiums, deductibles, copayments and coinsurances
• Pay your share of retiree medical insurance premiums through your former employer

Related Items

• What is an HSA?
• What are the differences between an HSA, HRA and an FSA?