How Your Health Savings Account (HSA) Works
- An HSA can help pay for health care expenses not paid by your medical plan now and in the future. The money saved in your HSA earns interest, can be invested once you reach a minimum threshold, rolls over from year to year if you don’t spend it and receives tax advantages. HSA contributions and earnings are not subject to federal taxes and not subject to state taxes in most states.
Save tax-free dollars with an HSA
When you enroll in the Cigna High Deductible plan, you can open a health savings bank account with HSA Bank.
- You decide how and when to use the funds.
- You can use HSA money to pay for qualified health care expenses not reimbursed by your medical, dental and vision plans.
- You can choose to save the money—unused dollars roll over from year to year.
- Whatever you don’t use earns interest and can be invested once a minimum threshold is met.
- Any interest or investment earnings on HSA funds are tax-advantaged. HSA contributions and earnings are not subject to federal taxes and not subject to state taxes in most states.
Contributing to your HSA
You can mail deposits directly to HSA Bank or you can arrange for your employer to have a certain amount deposited from your paycheck into your HSA.
Limits can be found here:
Using your HSA
You can use HSA funds to pay qualified health care expenses for yourself, your spouse or dependents you can claim on your Federal income tax.
- Online Bill Pay: You can use the online bill pay feature, free of charge, to have a check sent to yourself or your health care professional for qualified health care expenses that are not reimbursed.
- Debit Card: You can use your HSA debit card to pay for eligible services at the doctor’s or dentist’s office and your local pharmacy.
- Checks: For a small fee, you can purchase an HSA checkbook and use checks to reimburse yourself for qualified, out-of-pocket expenses or to pay your health care professional directly.
- Auto Pay: This permits Cigna to automatically forward all medical expenses to your HSA for payment. You can add or remove Auto Pay at any time during the year by completing the HSA Autoclaim Form and mailing it to the Cigna address on the form.
HSA Reimbursable Medical Expenses
Qualified medical expenses include diagnosis, treatment, or prevention of disease, or for treatments affecting any part or function of the body.
How Health Care Reform Impacts your HSA
Most over-the-counter medications (other than insulin and diabetic supplies) will require a doctor’s prescription to qualify for using pre-tax dollars. Other over-the-counter items are still eligible for HSA use including first-aid items, contact lens solution and supplies, birth control and more. The penalty for using your HSA on non-qualified items will now be 20%.
The healthcare reform law has made it possible for parents to keep children up to age 26 on their health plans if they have no other coverage—even those who are married and living away from home. However, HSA funds can only be spent on family members who qualify as true tax dependents. If they don’t qualify as tax dependents, those adult children can open their own HSAs and contribute the full amount allowed by the IRS for a family or an individual.
Be sure to talk to your tax advisor to understand IRS guidelines.