Health savings accounts (HSA)

An HSA is a tax-exempt medical savings account that can be used to pay for your and your dependents' eligible medical expenses. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

Eligible expenses include:

  • Doctor and hospital visits
  • Copays and coinsurance
  • Prescriptions
  • Some over-the-counter medications like pain relievers, allergy relief, cough suppressants, etc.
  • Feminine hygiene products
  • Dental and vision care, including prescription eyeglasses
  • Health insurance or medical expenses if unemployed
  • Medical expenses after retirement
  • Out-of-pocket expenses when covered by Medicare
  • Long-term care expenses and insurance premiums

A CareFirst BlueCross BlueShield Health Savings Account (HSA) plan has two main components:

  • A medical plan that meets certain IRS criteria*
  • A medical savings account called an HSA

With a CareFirst BlueCross BlueShield HSA plan, you are responsible for the full cost of your medical coverage until you meet your annual deductible. In-network preventive services are not subject to the deductible. These include routine physicals, well-child care and certain cancer screenings, as well as the lab tests associated with these preventive visits. Once you meet your annual deductible, your CareFirst coverage begins.

You own and control the money in your HSA.** Funds remain in your account from year to year. There is no "use it or lose it" provision. Even if you change health plan coverage and are no longer eligible to contribute to an HSA, you may continue to use your existing HSA funds.

HSA tax savings

An HSA provides you triple tax savings. In fact, as long as you use your HSA funds for qualified medical expenses, you are never taxed on those funds.

  • Tax-free contributions to your account—you can decide how much to contribute, up to the IRS maximum.
  • Tax-free interest and earnings on HSA investments—funds are initially deposited to an interest-bearing account. The funds can also be invested once the balance reaches a certain threshold.
  • Tax-free withdrawal for qualified medical expenses.

HSA plans are linked to higher deductible versions of plans you are already familiar with such as HMO and POS plans.

Understanding HSAs

If you are looking for specific information on how an HSA works, visit the IRS website. This website provides helpful tips including:

  • Explanation of rules for having an HSA
  • How HSA funds can be used
  • Various scenarios to help understand tax outcomes
  • Other types of tax-free funds

* To have an HSA, you must be enrolled in a high-deductible health plan (HDHP) that meets the IRS requirements for a qualified HDHP, including having a combined deductible for medical and pharmacy benefits.

** Note: The federal government does not contribute funds to your HSA.